The Federal Reserve Board hiked short-term interest rates by 75 basis points, its biggest hike in decades, to a range of 1.50-1.75%. The FOMC statement tells us, "Overall economic activity appears to have picked up after edging down in the first quarter. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures." Money market fund yields should jump in coming days as the new higher rate levels are passed through to funds. Our Crane 100 Money Fund Index, currently at 0.64%, should jump over the 1% level next week and should be heading towards the 1.40% level by the time the next Fed meeting rolls around later next month (on July 27). (Note: For those attending our Money Fund Symposium next week, June 20-22, in Minneapolis, conference materials are being posted to our "Money Fund Symposium 2022 Download Center." Watch for more Powerpoints soon, and for recordings to be posted next week after the show. See you Monday in Minnesota, and Happy Juneteenth!)

The Fed's release continues, "The invasion of Ukraine by Russia is causing tremendous human and economic hardship. The invasion and related events are creating additional upward pressure on inflation and are weighing on global economic activity. In addition, COVID-related lockdowns in China are likely to exacerbate supply chain disruptions. The Committee is highly attentive to inflation risks."

It explains, "The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 1 1/2 to 1-3/4 percent and anticipates that ongoing increases in the target range will be appropriate. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in the Plans for Reducing the Size of the Federal Reserve's Balance Sheet that were issued in May. The Committee is strongly committed to returning inflation to its 2 percent objective."

The FOMC adds, "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 public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments."

In other news, ICI released its latest monthly "Money Market Fund Holdings" summary, which reviews the aggregate daily and weekly liquid assets, regional exposure, and maturities (WAM and WAL) for Prime and Government money market funds.

The MMF Holdings release says, "The Investment Company Institute (ICI) reports that, as of the final Friday in May, prime money market funds held 32.8 percent of their portfolios in daily liquid assets and 49.4 percent in weekly liquid assets, while government money market funds held 86.0 percent of their portfolios in daily liquid assets and 93.0 percent in weekly liquid assets." Prime DLA was up from 30.4% in April, and Prime WLA was down from 50.8%. Govt MMFs' DLA decreased from 87.7% in April and Govt WLA decreased from 94.6% the previous month.

ICI explains, "At the end of May, prime funds had a weighted average maturity (WAM) of 16 days and a weighted average life (WAL) of 57 days. Average WAMs and WALs are asset-weighted. Government money market funds had a WAM 29 days and a WAL of 74 days." Prime WAMs were three days shorter than April, while WALs were unchanged from the previous month. Govt WAMs were unchanged and WALs were unchanged from April, respectively.

Regarding Holdings by Region of Issuer, the release tells us, "Prime money market funds’ holdings attributable to the Americas rose from $150.60 billion in April to $165.23 billion in May. Government money market funds’ holdings attributable to the Americas declined from $3,694.66 billion in April to $3,678.54 billion in May."

The Prime Money Market Funds by Region of Issuer table shows Americas-related holdings at $165.2 billion, or 39.0; Asia and Pacific at $82.6 billion, or 19.5%; Europe at $171.7billion, or 40.5%; and, Other (including Supranational) at $4.2 billion, or 1.1%. The Government Money Market Funds by Region of Issuer table shows Americas at $3.679 trillion, or 92.8%; Asia and Pacific at $99.7 billion, or 2.5%; Europe at $168.5 billion, 4.3%, and Other (Including Supranational) at $18.0 billion, or 0.5%.

Finally, the Investment Company Institute also published the release, "Retirement Assets Total $37.5 Trillion in First Quarter 2022." It includes data tables showing that money market funds held in retirement accounts rose to $545 billion (from $529 billion) in total, or 12% of the total $4.590 trillion in money funds. MMFs represent just 4.6% of the total $11.793 trillion of mutual funds in retirement accounts.

The release says, "Total US retirement assets were $37.5 trillion as of March 31, 2022, down 4.5 percent from December 31, 2021. Retirement assets accounted for 32 percent of all household financial assets in the United States at the end of March 2022. Assets in individual retirement accounts (IRAs) totaled $13.2 trillion at the end of the first quarter of 2022, a decrease of 5.4 percent from the end of the fourth quarter of 2021. Defined contribution (DC) plan assets were $10.4 trillion at the end of the first quarter, down 4.8 percent from December 31, 2021. Government defined benefit (DB) plans -- including federal, state, and local government plans -- held $7.9 trillion in assets as of the end of March 2022, a 1.8 percent decrease from the end of December 2021. Private-sector DB plans held $3.6 trillion in assets at the end of the first quarter of 2022, and annuity reserves outside of retirement accounts accounted for another $2.4 trillion."

The ICI tables also show money funds accounting for $379 billion, or 7%, of the $5.823 trillion in IRA mutual fund assets and $165 billion, or 3%, of the $5.970 trillion in defined contribution plan holdings. (Money funds in 401k plans totaled $112 billion, or 2% of the $4.676 trillion of mutual funds in 401k's.)

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