The Federal Reserve has been slow to cut interest rates, with the size of US money market funds surpassing $6.15 trillion, reaching a new high

Money market fund assets hit a new record high, as Federal Reserve policymakers continue to signal no rush to ease monetary policy, with expectations that short-term interest rates will remain high. Data from the Investment Company Institute shows that as of the week ending July 2, approximately $51.2 billion flowed into U.S. money market funds, the largest inflow in three months. This has pushed the total size of U.S. money market funds to $6.15 trillion, surpassing the previous all-time high set three weeks ago. Among them, government funds (mainly investing in securities such as Treasury bills, repurchase agreements, and institutional debt) saw their assets increase by $44.5 billion to $4.97 trillion. Institutional funds (mainly investing in commercial paper and other high-risk assets) saw their assets increase by $4.5 billion to $1.05 trillion. Since the Federal Reserve began its rate-hiking cycle in 2022, the rising interest rates have attracted retail investors to pour into money market funds. On Tuesday, Federal Reserve Chairman Powell stated that the latest economic data suggests inflation is returning to a downward trajectory, but the Federal Open Market Committee (FOMC) needs more evidence before cutting rates. The minutes of the June FOMC meeting released on Wednesday also emphasized Powell's remarks: Monetary policy should not be relaxed until more evidence shows inflation moving towards the 2% target. Some analysts point out that as long as the Federal Reserve remains on hold, funds will continue to flow into money market funds. John Canavan, a fixed income analyst at Oxford Economics, stated: "Money market fund yields will remain attractive until there is clarity on the Fed's rate cut." Despite the significant inflow of funds into money market funds, some institutional investors have begun to withdraw from major money market funds, as the U.S. Securities and Exchange Commission is set to introduce new regulations by the end of this year aimed at enhancing the liquidity and stability of money market funds, including increasing liquidity requirements and limiting redemption sizes. Some investors are adjusting their investment allocations before the new regulations take effect