You may not think much about the federal funds rate on a daily basis, but this key number impacts many areas of your financial life and the economy as a whole.
The Federal Reserve — the country’s central bank — periodically adjusts its target rate to keep the economy running smoothly and consumer prices in check. When the federal funds rate moves up or down, so do the interest rates on bank accounts and loans. In other words, changes in the Fed’s rate impact how much your savings can grow and how much you pay to borrow money.
So how does today’s federal funds rate compare to past years? Here’s a look at historical Fed interest rates so you can better understand how your bottom line is affected.
What is the federal funds rate?
The federal funds rate is set by the Federal Reserve and dictates what a bank can charge another bank for ultra-short-term loans (usually overnight) in order to meet reserve requirements. It’s expressed as a range, and financial institutions can negotiate a specific rate between each other within that range.
The Fed’s target rate also impacts the interest rates individual financial institutions set for financial products such as deposit accounts, bonds, loans, and credit cards.
Read more: How the Fed’s rate decision affects your bank accounts, loans, credit cards, and investments
Historical Fed interest rate: How it’s changed over 50 years
The federal funds rate soared in the early 1980s when inflation hit more than 13%, the highest level recorded. This marked the end of a macroeconomic period known as the “Great Inflation,” which economists believe was brought on by Federal Reserve policies that led to an overgrowth in the supply of money.
In response, the Fed raised interest rates, and the federal funds rate reached more than 19%.
In the late 1990s and into the early 2000s, there was another major economic shift when the Fed began bringing the federal funds rate down. This move was fueled by the dot-com bubble burst — a period of economic instability when investors poured capital into internet-based companies, which led to an overvaluation of many of these start-ups. Unfortunately, not all of these companies were profitable, and the fallout of this bubble burst led to many bankruptcies and a recession.
Then, following the terrorist attacks of Sept. 11, 2001, the Fed cut rates further due to widespread uncertainty and a slowdown in economic activity.
In 2007, the housing market crash prompted the Fed to once again lower its target rate to 2%. A series of rate cuts followed, eventually bringing the target range down to a range of 0%-0.25% — effectively zero — by December 2008.
As the economy recovered from the Great Recession, the Fed began slowly increasing rates again. But in 2020, the COVID-19 pandemic rocked the U.S. economy and brought about challenges such as supply-chain issues, reduced economic activity, and high unemployment. In March 2020, the Fed once again slashed rates to a range of 0%-0.25%.
Read more: How to recession-proof your savings
Beginning in 2022, the Fed pivoted sharply as inflation surged to a 40-year high. It raised the rate aggressively through 2022 and 2023, eventually peaking at 5.25%–5.5%, the highest level in over two decades. By late 2024, however, inflation had eased, and the Fed began gradually cutting rates again.
The target rate remained steady at 4.25%–4.5% until September 2025, when the Fed finally cut its rate again by 25 basis points. It made another 25 bps cut in October, and another in December.
The Fed has not changed rates so far in 2026. Today, the federal funds rate stands at a range of 3.5%-3.75%.
“Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East. Productivity growth and capital investment are strong. Job gains have kept pace with the workforce, and the unemployment rate has changed little,” the Fed said in a statement explaining the decision to hold rates steady once again.
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What to expect from the Fed moving forward
The next Fed meeting is slated for September 15-16, 2026, when the Federal Open Market Committee (FOMC) will decide whether or not to further adjust the federal funds rate.
Most experts expect the Fed to leave rates unchanged through the remaining meetings this year. The economy has continued to grow, unemployment has remained relatively low, and the Fed appears willing to wait for more inflation data before taking any action.
That said, the conversation has now shifted from whether or not the Fed will cut rates this year to whether it will implement a rate hike. In its latest July meeting, nine Fed officials agreed to keep the federal funds rate steady, but three dissented in favor of a quarter-point rate hike.
Sticky inflation — particularly from energy prices and housing — has led many investors to price in the possibility of at least one rate hike before year-end. The CME Fedwatch tool predicts a nearly 60% chance of a rate hike following the Fed’s September meeting.
Read more: Fed predictions for 2026