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: Macrobond.
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 maintains rates in June
At its meeting ending on 12 June, 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. 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 fell in April and is likely to trend down 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%. The Fed’s own projections are for the target range for the federal funds rate to end 2024 at 5.00%–5.25%, implying just one rate cut this year. This is broadly in line with our panelists, most of which see 0 to 2 rate cuts this year.
TD Economics’ James Orlando said: “The market is no longer priced for two full 25 bps cuts this year – leaning more towards the median of the FOMC. We'd agree with that. We recently pulled back the timing of rate cuts, as economic growth and inflation have yet to convincingly provide the Fed with enough evidence that cuts are warranted.” Nomura analysts were more dovish: “Chair Powell downplayed the [Fed’s own forecasts] in his press conference, noting that most FOMC participants did not react to [the May] CPI data. He emphasized that the 2024 rate projections were a 'close call.' In our view, data this year will likely be sufficient for the Fed to cut twice this year, beginning in September.”
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 51 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.
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