There is a constant question about what the Central Bank should focus on when choosing the interest rate.

And very often this mission takes into account the annual growth rate of the M2 monetary aggregate.

But this is not entirely correct.

We must always remember that M2 is the monetary base + the velocity of the monetary base.

But the Central Bank's interest rate reflects only the velocity of money circulation.

Thus, for a correct assessment, we need to take the M2 indicator and subtract the monetary base from it.

And then calculate the annual growth rate of this result.

This is shown in the figure below.