US MMF Sees 6 Consecutive Weeks of Fund Inflows... Expectation of Short-Term Interest Rate Rise

Money market funds (MMFs) in the United States have seen inflows for six consecutive weeks. This is interpreted as being influenced by expectations that short-term interest rates will rise, following recent indications from Federal Reserve (Fed) officials that they will not rush to ease monetary policy.

According to Bloomberg on the 30th (local time), the Investment Company Institute (ICI) reported that approximately $3.8 billion (about 5.2 trillion KRW) flowed into MMFs during the week ending on the 29th. In particular, $3.6 billion flowed into government fund MMFs, which primarily invest in government bonds, repurchase agreements (RPs), and similar instruments.

Jerome Powell, Chairman of the Fed, is giving a speech at a press conference after the May FOMC.
[Photo by Yonhap News]

The total assets of MMFs, which stood at $6.0657 trillion last week, increased to $6.0695 trillion (about 850 trillion KRW) with this inflow. This marks six consecutive weeks of fund increases and the highest level in seven weeks.

MMFs are ultra-short-term financial products that invest in short-term government-issued bonds, commercial paper (CP), and certificates of deposit (CDs). When interest rates rise, bond prices fall, so investing in MMFs allows investors to seek both trading gains and high interest income.

Since the Fed began an aggressive tightening cycle in 2022, a significant amount of funds has accumulated in the MMF market. Amid this, inflation has slowed at a pace slower than initially expected, and Fed officials' indication of a prolonged period of high interest rates ("higher for longer") is believed to have further boosted investor sentiment.

Lorie Logan, president of the Federal Reserve Bank of Dallas, stated at an event held in El Paso, Texas, on the same day, "Policy may not be as restrictive as initially thought," adding that it is too early to discuss rate cuts.

Meanwhile, on the 31st, the Fed's preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, will be released. The Federal Open Market Committee (FOMC) meeting is scheduled for November 11-12.

This content was produced with the assistance of AI translation services.