The size of the U.S. monetary base has reached a new high: the Federal Reserve has yet to cut interest rates, drawing attention to global financial markets

As the U.S. Federal Reserve continues to postpone interest rate cuts, global financial markets have attracted much attention. The size of the U.S. cargo base hit a new high, reflecting market concerns about the economic outlook. This article will delve into this phenomenon, analyze its causes and potential impacts, and provide valuable insights for investors.

The Federal Reserve is in no rush to relax monetary policy, leading to continued growth in the total assets of U.S. money market funds. Institutional investors are withdrawing from money funds as tighter liquidity will affect their returns.

Over the past few months, U.S. President Joe Biden has proposed a plan called the "Fiscal Support Act" to increase aid to unemployed workers and small businesses, while expanding the social safety net and providing funding for for vaccination. This has triggered speculation about the level of government spending. The most notable of these is whether the government will begin easing federal monetary policy in the coming weeks.
While many economists believe easing monetary policy is reasonable, some Wall Street analysts have warned that the U.S. economy could slip into recession if action is not taken. They worry that if the central bank is too loose, it could cause total assets in the U.S. money market to continue to grow, thereby undermining financial stability. In this case, investors may choose to withdraw from money funds because they are worried that future investment returns will be adversely affected.
For now, however, the Fed remains committed to their view that their goal is to keep interest rates low while controlling inflation. This means that even when discussing easy monetary policy, they will take this goal into account. However, this position does not mean they will change immediately, but they will likely wait and see the market reaction and make a decision in the coming months.
Recently, portfolio manager Mary McKenzie noted in an interview that the Fed may need more time to adjust their policies. She emphasized the importance of economic growth and job prospects, arguing that these two factors will continue to influence the U.S. economy. If the U.S. economy deteriorates, the Fed may be forced to accelerate its policy pace.
In general, there are different opinions on the current situation. Some analysts believe economic growth could accelerate as government stimulus measures are rolled out, which would have a positive impact on monetary policy. Others believe that the Fed should continue to maintain strict monetary policy due to rising inflationary pressures.
No matter which view you take, it must be acknowledged that changes in the global economic environment are having a profound impact on the financial market. In this context, as financial professionals, we need to pay close attention to various changes and make appropriate decisions based on these changes. We also need to understand that although monetary policy can have an impact on the economy, it cannot completely determine the direction of the economy. Therefore, we need to be flexible in order to remain competitive in a complex environment.

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