Americans holding cash just got some good news from the latest inflation report. With consumer prices rising faster than expected , the odds of a Federal Reserve rate cut happening soon appear slim. In fact, traders have pushed back expectations for a Fed cut until September, according to the CME FedWatch Tool . At one point they were expecting the reductions to start in June. They’ve also dialed back the number of reductions expected this year. That means those saving cash in money market funds and Treasury bills can expect to see their rates stay higher for longer. The annualized seven-day yield on the Crane 100 list of the 100 largest taxable money funds is currently 5.13%. “Money fund yields may not even drop below 5% at this point and won’t fall until after the Fed moves,” said Peter Crane, founder of Crane Data, a firm that tracks money markets. The appetite for money market funds is evident in the record amount of cash pouring into the products. Last week, there was $6.11 trillion sitting in money market funds, according to the Investment Company Institute , up from $5.87 trillion in mid-December. “With short-term rates still at very attractive levels, I’d expect inflows to money market funds to resume after tax season is over,” said Shelly Antoniewicz, ICI’s deputy chief economist. Maximizing savings Money market funds and high-yield savings accounts are a good place to park money for emergencies and other immediate spending needs because they are liquid, said certified financial planner Marguerita Cheng, CEO at Blue Ocean Global Wealth. If you have six to 12 months of living expenses set aside and have cash left over, you can then consider laddering some certificates of deposit, she said. Just be aware that if you withdraw from a CD before the maturity date, you’ll get penalized. Laddering is typically splitting money across several CDs of varying maturities. However, you can also buy one short-term CD every few weeks, said Cheng, a member of the CNBC Financial Advisor Council . She doesn’t suggest going out more than 18 months since short-term rates are higher than long-term ones. For those who have met their savings needs, Cheng suggests then using excess cash for your retirement account. She specifically likes Roth individual retirement accounts, which have income limits . Cash in your investment portfolio CFP Barry Glassman, founder and president of Glassman Wealth Services, likes cash because it has multiple purposes. “It is there for an…
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