The most recent acceleration in the annual growth rates of M1 and M2 has been dramatic, but the latest moves largely reflect a rise in the precautionary demand for money. The pick-up in the growth rate of our measure of M3 has been more modest because it also includes large time deposits, which are not Federally insured. In response to renewed concerns about the health of banks, investors have been withdrawing money from those accounts, particularly at foreign-owned institutions, and parking it in smaller deposit accounts that are insured.
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