US Banks Struggle to Retain Deposits as Investors Turn to Money Market Funds

Americans are changing where they park their cash, with money market funds becoming more popular than ever. The shift away from bank deposits and into these funds gathered pace in the last year as the Federal Reserve increased interest rates to fight inflation. Many banks were slow to pass on those increases to customers, so the draw of higher money market yields has prompted many savers and companies to seek out alternatives. The shift was turbocharged more recently by concerns about the safety of small and midsize US banks, sending the total amount in money funds to around $5.2 trillion. If these banks keep losing deposits to money markets and their bigger banking peers, there’s a risk that they will dial back lending in a way that causes a larger economic slowdown than the central bank is trying to engineer.

Source : US Banks Struggle to Retain Deposits as Investors Turn to Money Market Funds