What will happen to Money Market fund rates if the Fed lowers interest rates on Sept.18?

Hello,

Rates on money market mutual funds will go down if the Federal Reserve lowers interest rates on September 18th. However, there may be a lag between the Fed action and the lower rates. Some money market mutual fund portfolio managers may adjust maturities prior to the Fed action. If a mutual fund portfolio manager believes rates will be cut, he or she may increase the portfolio's maturities. Thus, there may be a delay in the fund's yield falling.

Here is a link for a good objective article about this issue:

http://www.westga.edu/~bquest/2001/effic...

I hope this helps.

Michael A. Weiss, CFA
The Editor
The Mutual Fund Investor
http://www.mutualfundinvestor.net

Well in the pass the market price drops some. But then it slowly gains it back and hopefully is a little higher.

When the Fed moves the Fed Funds rate down, all other short-term rates will fall as well, and because money market funds invest in exactly those kinds of securities, the rates that they pay (their yield) will fall as well. However, the value of your money market fund holdings will not fall; your shares should remain 'priced' at $1 per share. Only your yield going forward will be lower.

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