M1 is a narrow monetary aggregate, a statistical total of currency and specified highly accessible deposits. Its precise composition depends on the country and period. It measures included money, not the value of all payments made or people’s total wealth.
In the euro area, M1 includes currency and overnight deposits. The name does not mean you must close your account each day: these are funds available on demand rather than tied to an agreed maturity. The holders covered are residents other than monetary financial institutions, notably banks and money market funds, and central government. Simply adding every account called a current account will not do. A bank’s reserve balance at the central bank belongs to a different measure, Monetary Base; it is not a household deposit for shopping. [1]
In the US H.6 release, the Federal Reserve (Fed) includes savings deposits in M1 alongside currency and other specified deposits. It added savings retrospectively from May 2020 after rules on their accessibility changed. Reported M1 rose substantially, but the change itself left M2 unchanged because it already included savings deposits. The chart therefore does not show only new money creation. Part of the jump came from expanding what was counted. Before explaining growth, we must separate a definition change from actual changes in balances. [3] [2]
China’s central bank, the PBOC, described a new definition from January 2025 for M1: it includes M0, currency under that local definition, corporate and personal demand deposits, and customers’ funds at non-bank payment institutions. It also published comparable recalculated data for 2024. Do not confuse payment institutions’ customer funds with commercial banks’ reserve accounts. This documented example shows why the years compared need matching boundaries. For later periods, check the methodology used again. [4]
In our own simplified example, the public holds cash of 20 and included deposits of 80, making 100 altogether. Withdrawing 10 from a deposit into cash gives 30 + 70 = 100. With no other operations, M1 stays unchanged: people hold more notes but fewer deposits. We cannot leave the original 80 in the accounts and also count the amount withdrawn as new money. Withdrawal helps distinguish a change in money’s form from an increase in its total quantity. [1]
The Bank of England explains how a bank loan can create a new customer deposit. In our example, a loan of 25 with a matching included deposit raises the previous total of 100 to 125. Repaying principal of 25 from such a deposit takes it back to 100, assuming no other operations. Principal is the amount borrowed; interest is the cost of borrowing and is a different operation. Banks cannot lend without limit: capital, risk and funding constrain them. More bank reserves do not automatically produce a fixed multiple of M1 either. [5]
A household sends a company 15 between deposits that both belong to the sector being measured. Ownership changes, but their combined balance does not. The company can pay the money onward, creating another payment without M1 having to grow. Payment volume over a period is therefore not the same as the money stock. Distinguish a balance on a particular date from a monthly average too. US H.6 publishes monthly averages, which are not automatically balances on the last day of the month. [3]
In a euro area example, we move 20 from an overnight deposit into an included time deposit with a maturity of 1 year. M1 falls by 20, but the transfer alone does not change M2, which includes both types. Accessibility has changed, not automatically the holder’s property claim. When a narrow measure falls, we therefore also examine Broad Money, the wider monetary measure, and its composition. A deposit disappearing is different from moving beyond one statistical category’s boundary. [1]
Bitcoin.org describes the rules for creating new bitcoin (BTC) separately from market price. Coins under your own control are not a bank deposit. With a balance at a custodian, such as an exchange, withdrawal depends on the provider delivering your coins; that claim is different from being able to spend the coins directly. Likewise, M1 growth alone does not tell us who will want to exchange their money for bitcoin. Some may leave it in an account, others repay debt or buy goods. Drawing conclusions about price requires an explanation of people’s behavior and other conditions, not merely similar-looking curves. [6]
For the clearest picture, read this entry together with Monetary Base, M0, M2, Broad Money. The reverse links also lead from Monetary Base, Broad Money, M0, M2.