Why the Fed's Tightening Cycle Isn't Over Despite Slowing Money Supply

The Federal Reserve's tightening cycle has not yet run its course, despite July's modest 0.44% expansion in M2 money supply. Sticky inflation and hawkish signals from the European Central Bank suggest the Fed will maintain its restrictive stance through at least the September meeting. The market has repriced this reality: the 10-year Treasury yield climbed 8 basis points to 4.68% in August, while the unemployment rate held steady at 4.1% in August, giving policymakers room to stay the course. The data tells a clear story. Inflation remains above target, the labor market stays resilient, and global central banks are aligned in their hawkish posture. But beneath these headline numbers, cracks…