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The money-market fund industry is booming as the Federal Reserve holds interest rates steady.
Bloomberg, citing info from Crane Data LLC, reports that the amount of capital invested in the money-market industry has now soared to a record $7.4 trillion, with $320 billion pouring into the funds in 2025 so far.
Money-market funds are financial instruments that allow people to invest in lower-risk and short-term debt securities, including US Treasuries.
Deborah Cunningham, chief investment officer for global liquidity markets at Federated Hermes, tells Bloomberg that the Federal Reserve’s ongoing monetary policy choices suggest the money market industry could continue to grow and easily stretch to $7.5 trillion in assets this year.
“Five-percent-plus rates were nirvana, four-percent-plus is still very good – and if we dip down into the high threes, that’s quite acceptable as well.”
The Federal Open Market Committee (FOMC) announced last week that it planned to maintain the target range for the federal funds rate at 4.25-4.5%, arguing that it was the most suitable level to achieve both maximum employment and controlled inflation. The Fed has held interest rates steady since December, when it cut the rate by 0.25%.
Michael Bird, senior fund manager at Allspring Global Investments, tells Bloomberg that it’s “not surprising” that asset levels in the money-market sector have grown.
“Even if the Fed picks up its easing campaign this year, rates will still be relatively high…”
