$48.81 Billion in Deposits Leave US Banks within a Week Amidst Massive Inflows into Money Market Funds

Billions of dollars are being transferred from the conventional banking system as money market funds observe a significant influx of capital.

Based on the latest statistics provided by the Federal Reserve Economic Data (FRED) system, a total of $48.81 billion worth of deposits were withdrawn from American bank accounts between August 10th and 16th.

Over the course of the previous fiscal year, there has been a noteworthy reduction in the aggregate value of deposits held by American financial institutions. Specifically, this total has diminished from $18.03 trillion to $17.29 trillion, experiencing a significant decline equating to approximately $740 billion.

The withdrawal of deposits coincides with an increased influx of capital into money market funds, marking the highest level in six weeks. This trend is driven by investors seeking reliable returns on their liquid assets.

According to Refinitiv Lipper data, investors continue to be overall sellers of US equity funds. However, they recently made substantial acquisitions of $32.29 billion in money market funds within a single week, as reported by Reuters.

The healthcare, financials, metals & mining, and utilities sectors experienced significant losses amounting to $747 million, $579 million, $556 million, and $497 million correspondingly.

The influx of funds into money markets is occurring in response to a growing number of analysts’ predictions that suggest a prolonged period with elevated interest rates, as opposed to an abrupt shift initiated by central banks.

Economists at Goldman Sachs anticipate a potential reduction of the U.S. Federal Reserve’s benchmark interest rate during the second quarter of the forthcoming year.

The economists of the bank also forecast that there will be a omission of rate increases by the Federal Reserve in both the upcoming month and November.

“The reduction in our projected forecast is spurred by the objective of adjusting the funds rate to a more equitable level once inflation approaches the target.”

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