Retail money market mutual funds are a key component driving the aggregate's recent strength. Money fund yields have tended to rise relative to savings and small time deposit rates, making these funds comparatively attractive. Moreover, the flattening of the yield curve, which persisted through early 1996, induced some investors to shorten the maturity of their portfolios. Bank loan growth continues to moderate. Commercial and industrial loans fell slightly in March, reflecting in part a reduction of inventories, often financed by a drawing down of bank credit lines.
Consumer credit continues to grow, but at a slower rate than previously.
During these years, currency grew slightly faster than GNP, despite periods of high inflation and the increasing use of alternative payment methods. Recent evidence suggests that a growing share of U.S. currency is held outside the country by individuals who are uncertain about their own currency's future value. To these investors, the dollar is a refuge during times of political and economic uncertainty. Moreover, the dollar is preferred in many countries as an acceptable medium of exchange and as a safe store of value . Although March saw currency accelerate to its fastest rate in more than a year, growth remains well below its longer-term pace.