Money market funds are hesitant to buy longer-term Treasury bills even though the Federal Reserve cut interest rates by a half percentage point last week.

Fund managers say traders have overblown the comments from governor Michele Bullock and are siding with the central bank on the rate outlook.

The Reserve Bank has ruled out any near-term interest rate cuts despite recent reductions overseas. The board voted to hold rates steady at 4.35 per cent on Tuesday. Governor Michele Bullock maintained that inflation was still too high and that the bank would not be influenced by distorted data.

Wall Street traders have a unique challenge in placing bets on the stock market now that the Federal Reserve has started cutting interest rates: History is no longer a guide.