Federal Funds Rate: A Historical Perspective
Understanding the Federal Reserve's Monetary Policy
The federal funds rate is the interest rate at which banks and other depository institutions lend money to each other overnight. It is an important benchmark for the cost of short-term borrowing and a key indicator of the Federal Reserve's monetary policy. Forbes Advisor has compiled this history as a handy guide to the course of the federal funds rate and the Federal Reserve's monetary policy. For additional historical federal funds rate data, please see Daily Federal Funds Rate from 1928-1954.
Historical Perspective
The federal funds rate has been in existence since 1928. Throughout history, the Fed's key rate has been as high as 19.20% and as low as 0.025%. The current federal funds rate as of July 18, 2024, is 5.33%. Shows the daily level of the federal funds rate back to 1954. The fed funds rate is the interest rate that banks charge each other for overnight loans.
The effective federal funds rate (EFFR) is calculated as a volume-weighted median of overnight federal funds transactions reported in the FR 2420 Report of...
Conclusion
The federal funds rate is a critical tool in the Federal Reserve's monetary policy toolkit. By influencing the cost of borrowing, the Fed can help to stabilize the economy, control inflation, and promote economic growth. By understanding the history of the federal funds rate, we can better appreciate the complex and ever-evolving nature of monetary policy.
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