Federal Funds Rate History: 1980 Through The Present

💡 Explore the Federal Reserve's history of setting the federal funds rate from 1980 to the present.

The Federal Reserve's decision to set the federal funds rate has a significant impact on the US economy, influencing borrowing costs for consumers and businesses. The federal funds rate is the interest rate at which depository institutions lend and borrow funds from their local Federal Reserve Bank's trading desk.

Fed Funds Rate History Pre-1995

Prior to 1995, the Federal Reserve's Federal Open Market Committee (FOMC) made decisions about the federal funds rate with a focus on controlling inflation. The FOMC set the discount rate, which was then used to influence the federal funds rate. The discount rate was the interest rate at which banks and thrifts could borrow money directly from the Fed.

Fed Funds Rate History Post-1995

In 1995, the FOMC transitioned to setting the federal funds target rate, which is the rate at which banks lend and borrow money from each other. The FOMC meets eight times a year to discuss and set the federal funds target rate. The committee's decisions are based on economic data, including inflation, employment, and GDP growth.

Recent Federal Funds Rate Hikes

The Federal Reserve has raised the federal funds target rate numerous times since 2022, in an effort to combat inflation. The most recent rate hike was in March 2023, when the FOMC raised the target rate by 0.25%. The federal funds rate is currently at 5.00%.

What It Means for Investors