As expected, the Federal Reserve's FOMC cut interest rates by a quarter percent to a range of 3.5-3.75%, which means that money market fund yields should decline by a similar amount over the coming month. Our Crane 100 Money Fund Index, an average of the 100 largest money funds, should fall from its current 3.72% in coming days. (Money funds have a WAM, or weighted average maturity of 40 d,ays currently, so they should take this long to reflect the full Fed move.) The release titled, "Federal Reserve issues FOMC statement," tells us, "Available indicators suggest that economic activity has been expanding at a moderate pace. Job gains have slowed this year, and the unemployment rate has edged up through September. More recent indicators are consistent with these developments. Inflation has moved up since earlier in the year and remains somewhat elevated." (Note: There's still time to register for our "basic training" event, Money Fund University, which takes place next week, Dec. 18-19, in Pittsburgh! Attendees and subscribers may access the conference materials via our "Money Fund University 2025 Download Center.")
It explains, "The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months."
The FOMC says, "In support of its goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 3-1/2 to 3‑3/4 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective."
They add, "In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments. The Committee judges that reserve balances have declined to ample levels and will initiate purchases of shorter-term Treasury securities as needed to maintain an ample supply of reserves on an ongoing basis."
In other news, a press release titled, "Updated Principal Stability Fund Rating Methodology Published," says, "S&P Global Ratings ... published 'Principal Stability Fund Rating Methodology,' which describes its methodology for assigning principal stability fund ratings (PSFRs) globally. A PSFR, commonly referred to as a money market fund rating, is a forward-looking opinion about a fixed-income fund's ability to maintain principal value (i.e., stable net asset value)."
It says, "This methodology follows our request for comment (RFC), 'Request For Comment: Principal Stability Fund Rating Methodology,' Aug. 26, 2025. For changes between the RFC and the final criteria, as well as a summary of the comments received during the RFC process, see 'RFC Results For Principal Stability Fund Rating Methodology.'"
S&P writes under, "Key Changes From Previous Criteria," "We analyze the counterparty credit quality and diversification limits at the level of the underlying counterparties rather than at the level of the covered clearing agency (CCA) in situations where such CCA meets the requirements. In these cases, we will apply the counterparty credit quality and diversification limits as if there were no CCA; In situations where either the CCA does not meet the requirements, we do not have enough information to assess whether the requirements are met, or we do not believe the structure of the CCA is conducive to mitigating the concentration risk otherwise arising from their central clearing activities, we will treat the CCA as the sole counterparty when considering the diversification limits of the criteria; We amended paragraph 134 of our PSFR criteria to address this topic; We made no other analytical changes to the PSFR criteria. We expect no ratings impact upon implementation of these criteria from these revisions."
The updated "Principal Stability Fund Rating Methodology" document states, "A PSFR, commonly referred to as a money market fund rating, is a forward-looking opinion about a fixed-income fund's ability to maintain principal value (i.e., stable net asset value, or 'NAV'). PSFRs are typically assigned to funds that seek to maintain stable or, as is prevalent in non-U.S. funds, accumulating NAVs. PSFRs have an 'm' suffix (e.g., 'AAAm') to distinguish the principal stability fund rating from S&P Global Ratings' issue or issuer credit ratings (see the Appendix for our rating definitions)."
It explains, "The criteria consist of two main sections titled Evaluating Funds and Evaluating Security-Specific Risks and four supplemental sections titled, Master-Feeder Funds, Bifurcation, Parental Support, and Negative Yields. The Evaluating Funds and Evaluating Security-Specific Risks sections are further divided into subsections. In the Evaluating Funds section, we describe quantitative metrics, summarized in table 1 and in more depth in tables 2-10, plus our assessment of Evaluating Security-Specific Risks to establish the preliminary PSFR (step one)."
S&P adds, "The final PSFR is determined by lowering it from, or keeping it the same as, the level of the preliminary PSFR based on the impact of our qualitative assessments described in the management section. Subsections of the master-feeder funds, bifurcation (i.e., when a fund moves a distressed asset from one portfolio to another), parental support, and negative yields sections are applied when relevant and may influence the final PSFR. The qualitative assessments cannot lift a fund rating above the preliminary PSFR."
Finally, they write, "These criteria consider the sources of risk in a managed fund's portfolio and investment strategy and assess the impact that these risks could have on a fund's ability to maintain a stable or accumulating NAV. These risks include credit quality; investment maturity; liquidity; portfolio diversification, index, and spread risk; management; and security-specific risks. Each rating level reflects our view of the likelihood of a fund's ability to maintain a stable NAV."
