Could yields for money market fund see 6 percent?

Some retail money market funds are on the verge of cracking 5 percent returns, and experts suspect 6 percent might not be far behind.

Meanwhile, certificate of deposit (CD) yields and high-yield savings accounts, which have been galloping along, may slow a bit as banks need to concern themselves with both the short and the long end of the yield curve. Money funds, on the other hand, focus strictly on the short term and might be in a better position to pay even higher yields if the Fed continues to raise interest rates.

"I would never bet on anything, including Fed rate hikes," says Peter Crane, president and publisher of Crane Data's Money Fund Intelligence. "But I'm predicting a quarter-point (hike) for every (Fed) meeting the rest of the year. That's barring any new information. They always say past performance is no guarantee of future returns, but there's no better source for guessing.

"The onus is on people to say why the Fed should stop. They've been rolling along with the quarter-point hikes, and the fact that real estate and the economy have stayed as strong as they are is stunning."

Rate increases stimulate?

Crane points out that while rate hikes are undertaken to slow the economy, in the savings world, rate hikes actually have a stimulative effect on the economy that could add fuel to the inflation fire.

"Every point the Fed raises rates creates about $50 billion in annual interest income. Higher rates and a slowing economy don't seem to be happening just as lower rates and a faster economy didn't seem to work. I think the stimulative impact of higher rates and the restrictive impact of lower rates haven't been given their due."

Edward Gjertsen, a certified financial planner based in Glenview, Ill., is among those who think the Fed will pause after the June meeting.

"We're at risk of the Fed overshooting. I think we'll see 25 basis points in June and then they'll take a break unless something dramatic happens on the oil front, which the Fed can't control. I don't think the Fed wants to be too aggressive."

MMA rates on par with CDs