Money Market Overview Q4 2025
Keys to watch:
- Federal Reserve independence
- Money market ETF share class, stablecoin, tokenization
- Policy rate below neutral rate
What factors influenced the market during the quarter?
Nearly half of money market fund industry asset gains during 2025 occurred during the fourth quarter, as assets increased by $397 billion. Industry assets grew 13% year-over-year to a record $8.1 trillion. All the while, the Federal Open Market Committee decreased interest rates 75 basis points (0.75%) from September to December. Additionally, the Fed began reserve management purchases, in which it purchases short-dated government bonds to maintain its ample reserves supply. More notable though, the volume of purchases is greater than the amount of mortgage bonds maturing, effectively injecting liquidity into the market.
What is your outlook for the money markets?
Interest rates are expected to remain above 3% during 2026 and money market funds should continue to gather assets at a rate of 5% - 10%. Even as investors participated in other asset classes, their allocation to money market products continued to increase due to reinvestment of income. Changes in yields of money market funds have a delayed reaction due to the maturity transformation relative to federal funds and policy-rate-benchmarked securities. Conveniences that ensure safety of principal and same-day liquidity are among the reasons money-market funds will remain attractive relative to other cash management products.
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