Higher rates, bigger debt: why the money stock keeps growing

The Federal Reserve raised rates on 16 September 2026, and the money stock grew faster rather than slower over the same months. This note traces what sits between a policy rate and the quantity of money, and then looks at Singapore, where the policy instrument is not an interest rate at all.

What did the Fed decide, and what reaches Singapore?

The FOMC raised its target range from 3.50-3.75% to 3.75-4.00%, a quarter point, on a unanimous 12-0 vote. It was the first increase since 2023.

FOMC, 16 September 2026, unanimous (Federal Reserve)

The statement described a solid expansion and stable employment, and gave elevated inflation as the reason to act. It carried no forward guidance sentence, so the path has to be read from the Summary of Economic Projections: medians of 4.1% at end-2026, 4.1% at end-2027, 3.9% at end-2028 and 3.2% in the longer run.

Singapore receives this differently from most economies, because MAS does not set a policy interest rate. Monetary policy runs through the trade-weighted exchange rate band, and MAS tightened the slope of appreciation at both its April and its July 2026 reviews. Domestic interest rates here largely follow foreign rates and expectations about the Singapore dollar.

Did the money stock actually fall while rates rose?

It did not.

US M2, twelve-month growth, December 2025 → July 2026 (FRED M2SL)

Singapore’s own series also grew. M2 was SGD 892.4 billion in June 2026, 4.02% higher than twelve months earlier. Consumer prices rose 1.76% in the year to April 2026, the most recent month in this site’s series.

Series	Latest	Twelve-month change
Singapore M2	SGD 892.4 billion (June 2026)	+4.02%
Singapore consumer prices	135.89 (2010=100, April 2026)	+1.76%
US M2	USD 23,218.0 billion (July 2026)	+5.41%
SGD per USD	1.2763 (August 2026)	−0.65%

Why does a stock of debt push the other way?

A rate rise applies two opposite forces to a money stock at the same time.

Visual guide

Why does a stock of debt push the other way?

1. Restraining

   How it works

   Borrowing costs more, so less new credit is created

   Direction

   Down (−)

2. Enlarging

   How it works

   Interest owed on existing debt grows

   Direction

   Up (+)

Force	How it works	Direction
Restraining	Borrowing costs more, so less new credit is created	Down (−)
Enlarging	Interest owed on existing debt grows	Up (+)

The second force is easy to miss because interest does not disappear. It leaves the borrower’s account and arrives in a depositor’s or a bondholder’s account. Repaying principal cancels the deposit the original loan created; paying interest is a transfer between accounts. Where the borrower is a government, the payment is a net flow out of the government and into the private sector. In the United States, federal interest payments reached USD 931 billion in the first ten months of fiscal 2026, 11% more than a year earlier.

For households the same arithmetic runs through the mortgage book.

Bank lending to households, fourth quarter of 2025 (BIS). Singapore M2 was SGD 892.4 billion in June 2026

Series	Amount	Reference date
Household borrowing from banks	SGD 347.4 billion	Q4 2025
Central government debt	SGD 1,311.1 billion	Q4 2025
M2	SGD 892.4 billion	June 2026

Why the government figure does not mean what it looks like

Singapore is the clearest case in this series of a debt number that cannot be read at face value. Singapore Government Securities and Special Singapore Government Securities are not issued to finance spending, and the proceeds cannot be used for expenditure. The outstanding stock reflects the development of a domestic debt market and the investment of national savings rather than accumulated deficits.

When should you not use these figures directly?

First, the reference months differ: M2 is June 2026, consumer prices are April 2026, and the debt series are the fourth quarter of 2025. Any ratio should carry those dates.

Second, definitions differ across economies. Government debt may be central or general government; household debt may count bank lending only or total liabilities. Comparing differently defined numbers produces a meaningless answer.

Third, in an economy that runs policy through the exchange rate, movements in local interest rates are not a policy signal in the way they are elsewhere. Read the MAS statement for the policy stance and the rates for what they are.

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