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
United States Interest Rate Data
2019 | 2020 | 2021 | 2022 | 2023 | |
---|---|---|---|---|---|
Federal Funds Target Rate (%, eop) | 1.75 | 0.25 | 0.25 | 4.50 | 5.50 |
Secured Overnight Financing Rate (%, eop) | 1.55 | 0.07 | 0.05 | 4.30 | 5.38 |
10-Year Bond Yield (%, eop) | 1.92 | 0.93 | 1.52 | 3.88 | 3.88 |
Central Bank decreases rates in September
Latest bank decision: At its meeting ending on 18 September, the Federal Reserve decided to lower the target range for the federal funds rate by 0.5 percentage points to 4.75–5.00%, marking the first rate cut since early 2020.
Monetary policy drivers: The key domestic factors influencing the Central Bank's decision were the recent drop-off in headline inflation and weaker-than-expected jobs growth, which provided the leeway for looser monetary policy.
Significant further cuts are on the cards: In its own projections, the Fed expected the target range for the funds rate to end this year at 4.25–4.50% and 2025 at 3.25–3.50%. However, much will depend on the future evolution of price pressures and the labor market: Continued weaker-than-expected employment and inflation could encourage deeper cuts.
Panelist insight: On the near-term outlook, Nomura analysts said: “We continue to expect 25bp cuts in November and December, but [September]’s decision raises risks of a more dovish path. Actions speak louder than words; despite messaging that today was a one-off move, the Fed has signaled a high sensitivity to labor-market weakness.” Goldman Sachs analysts said: “We see the choice between a 25bp and 50bp cut in November as a close call. The deciding factor will likely be the next two employment reports, the second of which will come during the blackout period, and in particular the path of the unemployment rate.”
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 46 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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