What the federal funds rate is
The federal funds rate is the interest rate banks charge each other for overnight loans of reserves. The Federal Open Market Committee (FOMC) sets a target for it, a range 0.25 percentage points wide since December 2008, and the Fed steers the actual, effective rate into that range. Mortgage, credit card, savings and money market rates all move with it, which is why every Fed decision makes the news.
How to read the chart and tables
- Effective rate: the monthly average of the rate banks actually paid, since July 1954.
- FOMC target: the upper end of the target range (a single target rate before December 16, 2008), shown since September 1982.
- Every target rate change: each decision with the date it took effect and the change in percentage points.
- Hiking and cutting cycles: consecutive moves in the same direction since 1990, from the first move to the last.
Highs and lows
The effective rate peaked at 19.1% in June 1981, when the Fed under Paul Volcker fought double-digit inflation. It sat near zero from December 2008 to December 2015 after the financial crisis, and again from March 2020 to March 2022. The 2022–2023 cycle raised the target range from 0–0.25% to 5.25–5.50% in 16 months, the fastest rise since the early 1980s.
What a rate change means for you
- Savings and cash: money market funds and high-yield savings follow the Fed funds rate within weeks. The cash vs inflation calculator shows whether that kept up with prices.
- Bonds: existing bond prices fall when rates rise. See the bond yield calculator.
- Loans: variable-rate loans and credit cards reprice quickly; fixed mortgages follow longer-term yields.
How the Fed sets the rate
The FOMC has twelve voting members: the seven Federal Reserve governors, the president of the New York Fed and four of the other eleven regional Fed presidents in rotation. It meets eight times a year, and announces its decision at 2:00 p.m. Eastern time on the second day of the meeting; the new target takes effect the next day. Its goals, set by Congress, are maximum employment and stable prices, which the Fed defines as 2% inflation over time. The Fed raises rates to slow the economy when inflation is too high and cuts them to support it when unemployment rises.
Frequently asked questions
What is the federal funds rate today?
The calculator shows the current FOMC target range and the date it took effect at the top of the results. The data is updated every day from the Federal Reserve.
What is the difference between the target and the effective rate?
The target is what the FOMC decides; since December 2008 it is a range 0.25 points wide. The effective rate is the volume-weighted rate banks actually paid each other, which the Fed keeps inside the range.
What was the highest federal funds rate?
The monthly average effective rate reached 19.1% in June 1981, during the fight against high inflation.
How often does the Fed change rates?
The FOMC meets eight times a year and can also act between meetings. In some years it changes rates at most meetings; in others, such as 2009–2014, it did not change the target at all.
Why does the target history start in 1982?
The Federal Reserve’s published target series starts on September 27, 1982. Before that the Fed steered the rate less directly, so only the effective rate is shown.
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