Savings rates are basement-bound

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That didn’t take long: The Federal Reserve’s latest interest rate cut, on March 18, already has done some major damage to yields on money market mutual funds and bank savings certificates.

The average annualized taxable money fund yield sank to 2.17% in the seven days ended Tuesday from 2.62% a week earlier, according to Money Fund Report in Westborough, Mass.

As for bank CDs, the average nationwide yield on six-month certificates slid to 2.43% this week from 2.64% a week earlier, according to Informa Research Services in Calabasas. The one-year CD average fell to 2.54% from 2.75%.

Expect money fund yields and CD yields to keep falling down the stairs and into the basement in the next few weeks. The Fed’s latest cut, its sixth since mid-September, slashed its benchmark short-term rate by three-quarters of a percentage point, to 2.25%.

As The Times noted here, one of the Fed’s goals with lower short-term rates is to make cash accounts less attractive to investors as a place to hide -- and thus, they hope, to make stocks and bonds more attractive. That could get money flowing in the economy’s pipes again, easing the credit crunch.

So far, though, many investors are still preferring to play it safe: Money fund assets surged $53.6 billion in the latest week to a record $3.46 trillion, Money Fund Report said.