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United States Interest Rate

United States Interest Rate

Federal Funds Target Rate in United States

The US Federal Reserve's policy rates from 2013 to 2022 saw a cycle of hiking, lowering, and again hiking. Post-financial crisis, rates were kept near zero until 2015, when the Fed started gradual hikes as the economy improved. However, in response to the COVID-19 pandemic, rates were quickly cut back to near zero in 2020. By 2022, in the face of rising inflation, the Fed initiated a series of rate hikes, marking a significant shift towards tighter monetary policy.

The Federal Funds Target Rate ended 2022 at 4.50%, up from the 0.25% end-2021 value and from the reading of 0.25% a decade earlier. For reference, the average policy rate in Major Economies was 3.50% at end-2022. For more interest rate information, visit our dedicated page.

United States Interest Rate Chart

Note: This chart displays Policy Interest Rate (%) for United States from 2014 to 2023.
Source: Federal Reserve.

United States Interest Rate Data

2018 2019 2020 2021 2022
Federal Funds Target Rate (%, eop) 2.50 1.75 0.25 0.25 4.50
Secured Overnight Financing Rate (%, eop) 3.00 1.55 0.07 0.05 4.30
10-Year Bond Yield (%, eop) 2.69 1.92 0.93 1.52 3.88

Central Bank maintains rates in May

At its meeting ending on 1 May, the Central Bank decided to maintain the target range for the federal funds rate at 5.25%–5.50%, as expected by markets.

The Bank decided not to start cutting rates because both headline and core inflation were still above the Fed’s 2.0% target range and headline inflation has overshot market expectations every month so far this year. Solid economic activity further dissuaded the Bank from cutting; the Fed noted strong recent job gains and a low unemployment rate. On the flipside, renewed rate hikes were not warranted given that inflation is still likely to trend down towards the target later this year.

The Central Bank indicated it does not expect to reduce the target range until greater confidence is achieved that inflation is moving sustainably toward 2.0%. Over the last month, our panelists have continued to reduce their expectations for rate cuts this year in light of recent inflation overshoots. The Consensus is now for a little over 50 basis points of cuts by end-2024, with monetary easing only expected to ensue from Q3. This contrasts our forecasts at the end of last year for around 100 basis points of cuts by end-2024.

United Overseas Bank’s Alvin Liew said: “Our view remains unchanged that the Fed will keep its current FFTR steady at 5.25-5.50% and maintain this terminal FFTR level for longer beyond Jun-2024 where we factor in 50 bps of rate cuts for 2024 (i.e. two 25-bps cuts, one each in Sep 24 and Dec 24). Admittedly, the risk is still tilted towards the Fed delaying cuts even further, nudged by a slow inflation descent.” Desjardins’ Francis Généreux was more hawkish: “It […] seems like the Fed needs more time before it will consider lowering rates. The first cut may not happen until November.”

Consensus Forecasts and Projections for the next ten years

How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects American interest rate projections for the next ten years from a panel of 49 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts and averaged to provide one Consensus Forecast you can rely on for each indicator. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable interest rate forecast available for American interest rate.

Download one of our sample reports to visualize what a Consensus Forecast is and see our American interest rate projections.

Want to get access to the full dataset of American interest rate forecasts? Send an email to info@focus-economics.com.

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