Excess savings in checking accounts are not only being used for consumer spending, they are also being moved into money market accounts.
In fact, the level of deposits as a share of GDP is now below its pre-pandemic trend, suggesting that households now have lower levels of liquid cash available than they did just a few months ago.
Not only do consumers have less cash readily available, but the movement of money from checking accounts to money market accounts likely has negative implications for consumer spending going forward, given the marginal propensity to consume out of money market holdings is likely to be lower than the marginal propensity to consume of money held in a checking account.
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