We present federal funds rates coming from a range of simple monetary policy rules based on multiple economic forecasts. Use our tool to create your own rule. Released quarterly.

The Federal Reserve's balance sheet has undergone significant changes since 2007, reflecting its response to major economic crises. From a modest *** trillion U.S. dollars at the end of 2007, it ballooned to approximately **** trillion U.S. dollars by May 2025. This dramatic expansion, particularly during the 2008 financial crisis and the COVID-19 pandemic - both of which resulted in negative annual GDP growth in the U.S. - showcases the Fed's crucial role in stabilizing the economy through expansionary monetary policies. Impact on inflation and interest rates The Fed's expansionary measures, while aimed at stimulating economic growth, have had notable effects on inflation and interest rates. Following the quantitative easing in 2020, inflation in the United States reached * percent in 2022, the highest since 1991. However, by *************, inflation had declined to *** percent. Concurrently, the Federal Reserve implemented a series of interest rate hikes, with the rate peaking at **** percent in ***********, before the first rate cut since ************** occurred in **************. Financial implications for the Federal Reserve The expansion of the Fed's balance sheet and subsequent interest rate hikes have had significant financial implications. In 2023, the Fed reported a negative net income of ***** billion U.S. dollars, a stark contrast to the ***** billion U.S. dollars profit in 2022. This unprecedented shift was primarily due to rapidly rising interest rates, which caused the Fed's interest expenses to soar to over *** billion U.S. dollars in 2023. Despite this, the Fed's net interest income on securities acquired through open market operations reached a record high of ****** billion U.S. dollars in the same year.

Graph and download economic data for CSBS Community Bank Sentiment, Monetary Policy Index (CBSIMP) from Q2 2019 to Q1 2025 about community, business sentiment, banks, depository institutions, indexes, and USA.

It is commonly believed that the Fed's ability to control the federal funds rate stems from its ability to alter the supply of liquidity in the overnight market through open market operations. This paper uses daily data compiled by the author from the records of the Trading Desk of the Federal Reserve Bank of New York over the period March 1, 1984, through December 31, 1996. The author analyzes the Desk's use of its operating procedure in implementing monetary policy and the extent to which open market operations affect the federal funds rate-- the liquidity effect. The author finds that the operating procedure was used to guide daily open market operations. However, there is little evidence of a liquidity effect at the daily frequency and even less evidence at lower frequencies. Consistent with the absence of a liquidity effect, open market operations appear to be a relatively unimportant source of liquidity to the federal funds market.

The U.S. federal funds effective rate underwent a dramatic reduction in early 2020 in response to the COVID-19 pandemic. The rate plummeted from 1.58 percent in February 2020 to 0.65 percent in March, and further decreased to 0.05 percent in April. This sharp reduction, accompanied by the Federal Reserve's quantitative easing program, was implemented to stabilize the economy during the global health crisis. After maintaining historically low rates for nearly two years, the Federal Reserve began a series of rate hikes in early 2022, with the rate moving from 0.33 percent in April 2022 to 5.33 percent in August 2023. The rate remained unchanged for over a year, before the Federal Reserve initiated its first rate cut in nearly three years in September 2024, bringing the rate to 5.13 percent. By December 2024, the rate was cut to 4.48 percent, signaling a shift in monetary policy in the second half of 2024. In January 2025, the Federal Reserve implemented another cut, setting the rate at 4.33 percent, which remained unchanged throughout the following months. What is the federal funds effective rate? The U.S. federal funds effective rate determines the interest rate paid by depository institutions, such as banks and credit unions, that lend reserve balances to other depository institutions overnight. Changing the effective rate in times of crisis is a common way to stimulate the economy, as it has a significant impact on the whole economy, such as economic growth, employment, and inflation. Central bank policy rates The adjustment of interest rates in response to the COVID-19 pandemic was a coordinated global effort. In early 2020, central banks worldwide implemented aggressive monetary easing policies to combat the economic crisis. The U.S. Federal Reserve's dramatic reduction of its federal funds rate - from 1.58 percent in February 2020 to 0.05 percent by April - mirrored similar actions taken by central banks globally. While these low rates remained in place throughout 2021, mounting inflationary pressures led to a synchronized tightening cycle beginning in 2022, with central banks pushing rates to multi-year highs. By mid-2024, as inflation moderated across major economies, central banks began implementing their first rate cuts in several years, with the U.S. Federal Reserve, Bank of England, and European Central Bank all easing monetary policy.

The U.S. federal funds rate peaked in 2023 at its highest level since the 2007-08 financial crisis, reaching 5.33 percent by December 2023. A significant shift in monetary policy occurred in the second half of 2024, with the Federal Reserve implementing regular rate cuts. By December 2024, the rate had declined to 4.48 percent. What is a central bank rate? The federal funds rate determines the cost of overnight borrowing between banks, allowing them to maintain necessary cash reserves and ensure financial system liquidity. When this rate rises, banks become more inclined to hold rather than lend money, reducing the money supply. While this decreased lending slows economic activity, it helps control inflation by limiting the circulation of money in the economy. Historic perspective The federal funds rate historically follows cyclical patterns, falling during recessions and gradually rising during economic recoveries. Some central banks, notably the European Central Bank, went beyond traditional monetary policy by implementing both aggressive asset purchases and negative interest rates.

Abstract (en): The Federal Reserve implements its monetary policy by using open market operations in United States government securities to target the federal funds rate. A substantial decline in the stock of United States Treasury debt could interfere with the conduct of monetary policy, possibly forcing the Fed to rely more heavily on discount window lending or to conduct open market transactions in other types of securities. Either choice would cause the implementation of monetary policy to resemble the methods used by the Fed before World War II. This paper describes two things: (1) how the Fed implemented monetary policy before the war and (2) the conflicts that arose within the Fed over the allocation of private-sector credit when discount window loans and Fed purchases of private securities were a substantial component of Federal Reserve credit. Those conflicts help explain the Fed's failure to respond vigorously to the Great Depression. The experience suggests that a renewed reliance on the discount window or on open market operations in securities other than those issued by the United States Treasury could hamper the conduct of monetary policy if it leads to increased pressure on the Fed to affect the allocation of credit. The file submitted is 0205dwd.txt. These data are part of ICPSR's Publication-Related Archive and are distributed exactly as they arrived from the data depositor. ICPSR has not checked or processed this material. Users should consult the investigator if further information is desired.

Graph and download economic data for Equity Market Volatility Tracker: Monetary Policy (EMVMONETARYPOL) from Jan 1985 to May 2025 about volatility, uncertainty, equity, and USA.

The inflation rate in the United States declined significantly between June 2022 and May 2025, despite rising inflationary pressures towards the end of 2024. The peak inflation rate was recorded in June 2022, at *** percent. In August 2023, the Federal Reserve's interest rate hit its highest level during the observed period, at **** percent, and remained unchanged until September 2024, when the Federal Reserve implemented its first rate cut since September 2021. By January 2025, the rate dropped to **** percent, signalling a shift in monetary policy. What is the Federal Reserve interest rate? The Federal Reserve interest rate, or the federal funds rate, is the rate at which banks and credit unions lend to and borrow from each other. It is one of the Federal Reserve's key tools for maintaining strong employment rates, stable prices, and reasonable interest rates. The rate is determined by the Federal Reserve and adjusted eight times a year, though it can be changed through emergency meetings during times of crisis. The Fed doesn't directly control the interest rate but sets a target rate. It then uses open market operations to influence rates toward this target. Ways of measuring inflation Inflation is typically measured using several methods, with the most common being the Consumer Price Index (CPI). The CPI tracks the price of a fixed basket of goods and services over time, providing a measure of the price changes consumers face. At the end of 2023, the CPI in the United States was ****** percent, up from ****** a year earlier. A more business-focused measure is the producer price index (PPI), which represents the costs of firms.

The benchmark interest rate in the United States was last recorded at 4.50 percent. This dataset provides the latest reported value for - United States Fed Funds Rate - plus previous releases, historical high and low, short-term forecast and long-term prediction, economic calendar, survey consensus and news.

Daily Federal Funds Rate from 1928-1954 (https://fred.stlouisfed.org/categories/33951).

The federal funds rate is the interest rate at which depository institutions trade federal funds (balances held at Federal Reserve Banks) with each other overnight. When a depository institution has surplus balances in its reserve account, it lends to other banks in need of larger balances. In simpler terms, a bank with excess cash, which is often referred to as liquidity, will lend to another bank that needs to quickly raise liquidity. (1) The rate that the borrowing institution pays to the lending institution is determined between the two banks; the weighted average rate for all of these types of negotiations is called the effective federal funds rate.(2) The effective federal funds rate is essentially determined by the market but is influenced by the Federal Reserve through open market operations to reach the federal funds rate target.(2) The Federal Open Market Committee (FOMC) meets eight times a year to determine the federal funds target rate. As previously stated, this rate influences the effective federal funds rate through open market operations or by buying and selling of government bonds (government debt).(2) More specifically, the Federal Reserve decreases liquidity by selling government bonds, thereby raising the federal funds rate because banks have less liquidity to trade with other banks. Similarly, the Federal Reserve can increase liquidity by buying government bonds, decreasing the federal funds rate because banks have excess liquidity for trade. Whether the Federal Reserve wants to buy or sell bonds depends on the state of the economy. If the FOMC believes the economy is growing too fast and inflation pressures are inconsistent with the dual mandate of the Federal Reserve, the Committee may set a higher federal funds rate target to temper economic activity. In the opposing scenario, the FOMC may set a lower federal funds rate target to spur greater economic activity. Therefore, the FOMC must observe the current state of the economy to determine the best course of monetary policy that will maximize economic growth while adhering to the dual mandate set forth by Congress. In making its monetary policy decisions, the FOMC considers a wealth of economic data, such as: trends in prices and wages, employment, consumer spending and income, business investments, and foreign exchange markets. The federal funds rate is the central interest rate in the U.S. financial market. It influences other interest rates such as the prime rate, which is the rate banks charge their customers with higher credit ratings. Additionally, the federal funds rate indirectly influences longer- term interest rates such as mortgages, loans, and savings, all of which are very important to consumer wealth and confidence.(2) References (1) Federal Reserve Bank of New York. "Federal funds." Fedpoints, August 2007. (2) Board of Governors of the Federal Reserve System. "Monetary Policy (https://www.federalreserve.gov/monetarypolicy.htm)".

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The Federal Reserve's balance sheet ballooned following its announcement to carry out quantitative easing to increase the liquidity of U.S. banks in early 2020. The balance sheet continued to grow in the following period as well, with a downward trend in 2023. As of February 29, 2024, the Fed's balance sheet amounted to roughly 7.6 trillion U.S. dollars. The most drastic increase in the observed period took place in the first half of 2020. This measure was taken to increase the money supply and stimulate economic growth in the wake of the damage caused by the COVID-19 pandemic. The Federal Reserve was not the only institution that implemented an expansionary monetary policy in response to the pandemic. For instance, the European Central Bank expanded its money supply in March 2020 and kept doing so over the following months. How do central banks increase the amount of money in circulation? Central banks can increase the money circulating in the economy in many ways. For instance, they can decrease banks’ reserve requirements to stimulate lending or decrease the interest rates to reduce the cost of borrowing for commercial banks. Alternatively, central banks can engage in open market operations (OMO) and buy securities such as government bonds from commercial banks or institutions. By conducting open market operations, the Federal Reserve expanded its balance sheet by seven trillion U.S. dollars between 2007 and 2023. All these measures aim to increase bank loans to entrepreneurs and consumers in order to stimulate employment and economic growth. Impact of COVID-19 on the U.S. economy The COVID-19 pandemic had a tremendous impact on national economies worldwide, and the United States was no exception. During the early months of the crisis, many lost their jobs, mostly those in lower-income categories. As a consequence, many Americans found it difficult to pay their rent and cover basic household expenses. Furthermore, in April 2022, most small business owners claimed that the pandemic had a large or moderate negative effect on their businesses. Overall, the gross domestic product (GDP) of the United States decreased by roughly 2.2 percent in 2020. In the following years, however, it increased notably, surpassing 25 trillion U.S. dollars in 2022.

This paper investigates the nature of nonlinearities in the monetary policy rule of the US Federal Reserve (Fed) using the flexible approach to nonlinear inference. We find that while there is significant evidence of nonlinearity for the period to 1979, there is little such evidence for the subsequent period. Possible asymmetries in the Fed's reactions to inflation deviations from target and the output gap in the 1960s and 1970s may tell part of the story, but do not capture the entire nature of the nonlinearity. The inclusion of the interaction between inflation deviations and the output gap, as recently proposed, appears to characterize the nonlinear policy rule more adequately.

Graph and download economic data for Economic Policy Uncertainty Index: Categorical Index: Monetary policy (EPUMONETARY) from Jan 1985 to Apr 2025 about uncertainty, World, and indexes.

Many of the Federal Reserve's (the Fed's) monetary policy operations involve trading with primary dealers. We find that, for agency MBS, dealers charge 2.5 cents (per $100 face value) higher selling to the Fed than to non-Fed customers. Controlling for the same dealer, same security, and same trading time, this discriminatory pricing likely arises from dealers' market power rather than inventory costs. Further, matching trade size reduces the price differential by more than half, implying that dealers' market power greatly relates to the Fed's purchases in large amounts, whereas the Fed's limited breadth of counterparty choice also plays some role.

We use Bayesian methods to estimate changes in US post-war monetary policy in the Smets and Wouters model. We perform the estimations by allowing for a break in monetary policy at the time of Volcker's appointment as chairman. This enables us to capture changes in the monetary policy regime introduced by Volcker during the Volcker-Greenspan period. We find support for the assumption that monetary policy in the Volcker-Greenspan period performed optimally under commitment. Our estimation strategy allows us to estimate the preferences of the US Federal Reserve in the Volcker-Greenspan period, where the main objective of policy appears to be inflation, followed by interest rate stabilization, output growth and interest rate smoothing. We find that the Great Moderation of output growth is explained by a combination of two factors: the decrease in the volatility of the structural shocks and the improved monetary policy conduct. Inflation Stabilization, however, is mainly due to the change in monetary policy that took place at the beginning of Volcker's mandate.

United States - Economic Policy Uncertainty : Categorical : Monetary policy was 444.37323 Index in March of 2025, according to the United States Federal Reserve. Historically, United States - Economic Policy Uncertainty : Categorical : Monetary policy reached a record high of 444.37323 in March of 2025 and a record low of 16.57451 in September of 1997. Trading Economics provides the current actual value, an historical data chart and related indicators for United States - Economic Policy Uncertainty : Categorical : Monetary policy - last updated from the United States Federal Reserve on May of 2025.

The FRB/US model is a large-scale estimated general equilibrium model of the U.S. economy that has been in use at the Federal Reserve Board since 1996. The model is designed for detailed analysis of monetary and fiscal policies. One distinctive feature compared to dynamic stochastic general equilibrium (DSGE) models is the ability to switch between alternative assumptions about expectations formation of economic agents. Another is the models level of detail: FRB/US contains all major components of the product and income sides of the U.S. national accounts. Since its original development, the model has continuously undergone changes to cope with the evolving structure of the economy, including conceptual revisions to sectoral definitions of the national accounts.

From 2003 to 2025, the central banks of the United States, United Kingdom, and European Union exhibited remarkably similar interest rate patterns, reflecting shared global economic conditions. In the early 2000s, rates were initially low to stimulate growth, then increased as economies showed signs of overheating prior to 2008. The financial crisis that year prompted sharp rate cuts to near-zero levels, which persisted for an extended period to support economic recovery. The COVID-19 pandemic in 2020 led to further rate reductions to historic lows, aiming to mitigate economic fallout. However, surging inflation in 2022 triggered a dramatic policy shift, with the Federal Reserve, Bank of England, and European Central Bank significantly raising rates to curb price pressures. As inflation stabilized in late 2023 and early 2024, the ECB and Bank of England initiated rate cuts by mid-2024, and the Federal Reserve also implemented its first cut in three years, with forecasts suggesting a gradual decrease in all major interest rates between 2025 and 2026. Divergent approaches within the European Union While the ECB sets a benchmark rate for the Eurozone, individual EU countries have adopted diverse strategies to address their unique economic circumstances. For instance, Hungary set the highest rate in the EU at 13 percent in September 2023, gradually reducing it to 6.5 percent by October 2024. In contrast, Sweden implemented more aggressive cuts, lowering its rate to 2.25 percent by February 2025, the lowest among EU members. These variations highlight the complex economic landscape that European central banks must navigate, balancing inflation control with economic growth support. Global context and future outlook The interest rate changes in major economies have had far-reaching effects on global financial markets. Government bond yields, for example, reflect these policy shifts and investor sentiment. As of December 2024, the United States had the highest 10-year government bond yield among developed economies at 4.59 percent, while Switzerland had the lowest at 0.27 percent. These rates serve as important benchmarks for borrowing costs and economic expectations worldwide.

We study the effects of monetary policy on economic activity separately identifying the effects of a conventional change in the fed funds rate from the policy of forward guidance. We use a structural VAR identified using external instruments from futures market data. The response of output to a fed funds rate shock is found to be consistent with typical monetary VAR analyses. However, the effect of a forward guidance shock that increases long-term interest rates has an expansionary effect on output. This counterintuitive response is shown to be tied to the asymmetric information between the Federal Reserve and the public.