Why Money Market Fund Rates Are Falling and What to Do (2026)

Updated 24 October 2026

If your money market fund (MMF) is paying less than it did a year ago, you are not imagining it. Kenyan MMF returns averaged 9.3% a year after fees in mid-October 2026, down from 9.9% a year earlier, as we reported in our news story on falling MMF returns. The cause is not your fund manager. It is the fall in the interest rates that MMFs earn on government paper and bank deposits. This guide explains the chain, what the Central Bank of Kenya’s latest numbers show and what you can sensibly do about it.

Where MMF Returns Come From

A money market fund pools savers’ cash and lends it out for short periods: mostly to the government through Treasury bills and to banks through fixed and call deposits. The fund’s yield is the interest on those holdings, minus the manager’s fee. When the rates on T-bills and deposits fall, new money and maturing holdings are reinvested at lower rates, and the fund’s yield follows, usually a few weeks to a few months behind.

So the question “why are MMF rates falling?” is really “why are T-bill and deposit rates falling?”

The Central Bank Has Cut Rates Ten Times

The Central Bank Rate (CBR) is the anchor for short-term rates in Kenya. The Monetary Policy Committee raised it to 13% in December 2023 to fight inflation and a weak shilling. From August 2024 it began cutting. On 10 February 2026 it lowered the CBR to 8.75% from 9%, which Reuters counted as the tenth straight cut. The committee also narrowed the interest-rate corridor around the CBR to plus or minus 0.5 percentage points, which ties overnight bank lending more tightly to the policy rate.

At its 7 October 2026 meeting, the MPC held the rate at 8.75% and said it will meet again in December 2026.

T-Bills and Deposits Followed

CBK’s key rates table, as published in late October 2026, shows how far the knock-on has gone:

With the 91-day bill under 9% and the average deposit rate under 7%, a fund cannot keep paying double digits for long without taking more risk. The ones still above 10% tend to hold longer-dated paper bought when rates were higher, and those yields fade as the paper matures.

Will Rates Keep Falling?

Probably not much further in the near term. The MPC has now held at 8.75% for eight months. In October it noted that inflation rose to 6.8% in September from 6.6% in August, driven by higher fuel and food prices tied to the conflict in the Middle East, and said it stands ready to act if needed. Inflation is still inside the 2.5% to 7.5% target range, but closer to the top. Of the economists Reuters polled before the October meeting, two expected a rate rise. That suggests the cutting cycle has paused, so MMF yields may level off rather than keep sliding at the pace of the past two years.

What You Can Do

1. Compare the after-tax yield. MMF interest is subject to 15% withholding tax. A fund advertising 9% pays about 7.65% after tax. Compare that, not the headline, against the alternatives.

2. Check what your fund holds and charges. A fund paying far above its peers may be holding riskier or longer-dated paper. Managers publish fund fact sheets; read the asset mix and the management fee.

3. Consider T-bills or bonds for money you will not touch. Buying a 364-day T-bill or a bond directly locks in a rate for a set period instead of floating down with the market. Our guides on MMFs versus Treasury bills and how to buy Treasury bills cover the trade-offs and the steps.

4. Keep your emergency fund in an MMF anyway. Even at lower yields, an MMF still pays far more than the 3.53% average savings rate, and you can usually withdraw within a few working days. Liquidity is the reason to hold one.

5. Be careful chasing returns. Some savers are moving to “special funds” that can hold shares, offshore assets or private debt. These can pay more but can also lose value. Only move money you can leave invested through a bad year.

Compare Current Yields

Here are the latest yields that fund managers publish, collected from their own sites. Tap a column to sort.

Last updated: 24 Oct 2026, 06:15 EAT. Tap a column heading to sort.

For background on how each fund works and how to join, see our money market funds guide.