Yields on money market mutual funds, which have declined by half -- from just above 5.0% to just above 2.5% -- over the past 8 months, appear to be bottoming out. While betting is leaning towards another rate cut at next week's (April 29-30) meeting of the Federal Reserve Board of Governors' Open Market Committee, it's increasingly looking like another 1/4-point reduction might be it for this cycle. This would bring the Federal funds target rate to 2.0% from its current 2.25%, and would drag money fund and money market rates downward another quarter-percent.

Crane Data predicts no cut by the Fed next week, and we believe the next rate move is higher. As inflation concerns rise, and recession fears decline, the question is growing as to whether another cut is needed or helpful. Gridlock in most of the money and other markets has been broken by the Fed's repeated and innovative liquidity measures, which have included the single-tranche OMO program, the term discount window program, primary dealer credit facility and term securities lending facility.

Over the past week, money fund yields fell by 7 basis points (0.07%) to 2.52% (7-day yield as measured by the Crane 100 Money Fund Index). The broader Crane Money Fund Average fell by 6 bps to 2.36%. Our Crane Tax Exempt Money Fund Index rose by 25 bps to 1.91%.

Assets of money funds, which had declined sharply following April 15, have already begun rebounding. MFI Daily's asset collection rose by $4.1 billion in the latest week to $2.837 trillion, and rose by $5.1 billion yesterday. ICI's more comprehensive weekly totals show total assets flat (down $830 million) at $3.484 trillion. Retail assets declined by $12.2 billion to $1.250 trillion while Institutional assets rose by $11.33 billion to $2.233 billion.

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