Recent US narrow money acceleration continued in the latest week. The last real money growth data point in the chart below is a June projection assuming that the level of narrow money stabilises at its latest reading (week ending 22 May) and consumer prices rise by 0.2% in both May and June.


The continued pick-up is consistent with the story of a monetary boost from the normalisation of bank funding markets following the disruptive effect last year of money fund regulatory reform.


This US monetary boost may explain the buoyancy of US / global equity markets despite evidence that global economic momentum is rolling over, e.g. the manufacturing PMI fell to a six-month low in May.


The monetary pick-up, however, suggests that US growth will buck the global trend and rebound strongly by late 2017, in which case the Fed may need to step up the pace of tightening to prevent labour market overheating. The market may be complacent in discounting only a 50% probability of more than one quarter-point rate hike, and just 10% of more than two, over the remainder of 2017 (CME FedWatch tool).