The record $5.9 trillion hoard in money-market fund represents dry powder ripe to be redeployed once central banks begin cutting rates, Barclays strategist Emmanuel Cau wrote in a note last week. "With a lot of that cash coming from banking accounts, it's the money that people will use to meet their regular expenses. "To that point, Federated Hermes's Cunningham thinks money-market funds will stay competitive even as the Fed embarks on rate cuts to bring monetary policy out of restrictive territory. It's unlikely that the Fed's normalization process will bring interest rates back to zero, but rather to between 3% and 4%, she said. That level will keep retail investors engaged instead of returning their deposits to banks.

Source: Economic Times January 04, 2024 03:05 UTC