There is little room to push short-term rates lower.
When investors return Tuesday, they will still have to face uncertainty about how much higher the nation's central bank will push short-term interest rates.
Investors have been counting on the Fed to push short-term borrowing costs lower since it took a partial step on Aug. 17 by reducing its discount rate, which applies to emergency short-term loans to banks.
With inflationary pressures rising, the new Fed chairman will need to push short-term interest rates higher; there will be much less room to cut rates later, as Mr Greenspan did after the stockmarket bubble burst in 2001.
More likely, managers say, is that a downgrade of Treasury bond ratings would push short-term rates up by one-quarter to three-quarters of a point, leaving the net asset value of money funds safely at $1 a share.
Central bankers often push short-term real rates to zero, or even below, in a downturn, suggesting there is plenty of room to cut, particularly since the housing glut means lower interest rates may pack less punch.
The Federal Reserve adopted a more aggressive stance today in its fight against inflation, voting to push short-term interest rates up by half a percentage point to try to slow the headlong pace of economic growth.
The Fed cannot push short-term rates below zero, but it still can reduce long-term rates, which are based on the expected level of short-term rates over the life of a loan, by persuading investors that those rates will remain near zero.
As Janet Yellen, the Fed's vice chairwoman, said last April, "In effect there has been a significant shortfall in the overall amount of monetary policy stimulus since early 2009," because the central bank can't push short-term interest rates below zero, and its other measures, like asset purchases, haven't filled the gap.
An economic recovery and the Federal Reserve will eventually push short and long-term interest rates higher.
