Central banks in the US and UK held rates steady during the second quarter, with the European Central Bank (ECB) cutting rates by 25 basis points in its June meeting.
We will be scrutinizing US economic data releases for any unexpected weakness or strength that could push the FOMC to act beyond the current market pricing for short-term rates.
We believe that inflation should continue to moderate in 2024, although it will likely remain higher than the Fed’s 2% target and improvement will likely not be linear.
Global Liquidity Snapshot offers a quarterly at-a-glance look at what’s happening in short-term liquidity markets around the world.
The Federal Open Market Committee (FOMC) kept policy rates unchanged as measures of employment and inflation pointed to some cooling. Readings of US Continuing Jobless Claims have shown some moderation, and the latest core PCE inflation data has declined, inching closer to the Federal Reserve’s (Fed) 2% target. At the end of the quarter, market participants were expecting a 25-basis point cut in the federal funds rate at the November FOMC meeting and an approximate 80% chance of another 25-basis point cut at the December meeting. According to the FOMC’s latest Summary of Economic Projections (aka “dot plot”), participant expectations for the appropriate target level for the federal funds rate shifted higher in 2024 and 2025, reflecting expectations of shallower rate cuts than current market pricing. Money market fund industry assets have remained near a record high of USD 6.1 trillion. Elevated short-term yields and an inverted US Treasury yield curve has been a driving factor of the growth in money market fund assets, as money market funds remain an attractive cash management investment vehicle for investors.1
Could we see a repeat of 2019’s reserve scare?
In this discussion we review the factors that influenced the sharp moves in the repo market in 2019, and explore the possibility of a reoccurrence.
Global Liquidity reveals cash trends in sponsored AFP Liquidity Survey
How are treasurers managing short-term investments while preparing for the future? Find out in the 2024 AFP Liquidity Survey, sponsored by Invesco Global Liquidity.
Justin Mandeville on the pitfalls of clicking for yield
With money market assets at record highs and shareholder cash flows moving from one fund to another, clearly many investors are chasing returns versus maintaining a longer-term view.
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