The latest "​Minutes of the Federal Open Market Committee" (​Aug. 9) mention money market mutual funds at several points. The minutes say, "​Over the intermeeting period, U.​S. financial markets were strongly influenced by developments regarding the fiscal situations in the United States and in Europe and by generally weaker-​than-​expected readings on economic activity. Throughout the period, waxing and waning concerns about the sovereign debt of peripheral euro-​area countries appeared to have an effect on investor appetite for risk, leading to volatility in many asset markets. Late in the period, investor focus appeared to turn to the U.​S. debt ceiling and the potential for delayed debt service payments by the Treasury Department, the possibility of a downgrade of U.​S. sovereign debt, and the prospects for significant long-​term fiscal consolidation. Liquidity and funding in money markets deteriorated in the last week of July, and interest rates on a number of short-​term funding instruments increased markedly. The strains in these markets eased after legislation to raise the debt ceiling and to cut the federal budget deficit was signed into law on August 2.... The market for CP issued by financial firms experienced some strains late in the period as institutional money market mutual funds reportedly increased their cash positions and sought to decrease exposure to CP issued by some entities perceived to be less creditworthy.... M2 expanded rapidly in June and July. Liquid deposits, the largest component of M2, increased robustly, likely reflecting safe-​haven flows from riskier assets along with temporary increases in the amount of deposits that money market mutual funds held at their custodian banks."

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