FOMC Raises Target Rate to 3.75-4.0%
In its first move since cutting the Federal funds target rate by 1/4 point in December 2025, the Federal Reserve Open Market Committee voted unanimously to raise rates by 1/4 point to a range of 3.75-4.0%. The release, "Federal Reserve Issues FOMC Statement," tells us, "The Federal Open Market Committee approved the following statement for release by a 12–0 vote: The Committee decided to raise the target range for the federal funds rate by 1/4 percentage point to 3-3/4 to 4 percent, in support of the Federal Reserve's dual mandate. The Committee is continuing its policy of maintaining ample reserves in the banking system. Economic activity is expanding at a solid pace. While uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient. Productivity growth is strong, and capital investment is robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little. Inflation remains elevated. Today's policy action will support a timelier return to the Committee's 2 percent goal. The Committee will deliver price stability." Money market mutual fund yields, as measured by our Crane 100 Money Fund Index, currently average a yield of 3.51%. Yields should move higher in coming days and weeks, and should level off around 3.75% prior to Halloween. (Money funds have average WAMs, or weighted average maturities of 37 days, which means their portfolio should turn over and reflect the higher rates in just over a month.) Yields should begin moving higher starting Thursday, and they should jump next week as the higher overnight "repo" rates make their way through the 7-day yield averages.
