The Federal Reserve kept the fed funds rate steady at 5.25%-5.5% for a third consecutive meeting in December 2023, in line with expectations but indicated 75bps cuts in 2024. Policymakers said that recent indicators suggest that economic growth has slowed and job gains have moderated but remain strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated. The central bank also published new projections. GDP growth is expected higher this year (2.6% vs 2.1% in the September projection), but slightly lower in 2024 (1.4% vs 1.5%). Also, PCE inflation was revised lower for both 2023 (2.8% vs 3.3%) and 2024 (2.4% vs 2.5%) as well as core PCE inflation which is seen at 3.2% in 2023 (vs 3.7%) and 2.4% (vs 2.6%) next year. Unemployment projections remained steady at 3.8% for 2023 and 4.1% for next year. The so-called dot plot showed the median year-end 2024 projection for the federal funds rate fell to 4.6% from 5.1% seen in September. source: Federal Reserve
The benchmark interest rate in the United States was last recorded at 5.50 percent. Interest Rate in the United States averaged 5.42 percent from 1971 until 2023, reaching an all time high of 20.00 percent in March of 1980 and a record low of 0.25 percent in December of 2008. This page 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. United States Fed Funds Interest Rate - data, historical chart, forecasts and calendar of releases - was last updated on December of 2023.
The benchmark interest rate in the United States was last recorded at 5.50 percent. Interest Rate in the United States is expected to be 5.50 percent by the end of this quarter, according to Trading Economics global macro models and analysts expectations. In the long-term, the United States Fed Funds Interest Rate is projected to trend around 4.75 percent in 2024 and 3.75 percent in 2025, according to our econometric models.
United States Fed Funds Interest Rate
In the United States, the authority to set interest rates is divided between the Board of Governors of the Federal Reserve (Board) and the Federal Open Market Committee (FOMC). The Board decides on changes in discount rates after recommendations submitted by one or more of the regional Federal Reserve Banks. The FOMC decides on open market operations, including the desired levels of central bank money or the desired federal funds market rate.
| Actual | Previous | Highest | Lowest | Dates | Unit | Frequency | ||
|---|---|---|---|---|---|---|---|---|
| 5.50 | 5.50 | 20.00 | 0.25 | 1971 - 2023 | percent | Daily |
News Stream
Fed Indicates Three Rate Cuts in 2024
The Federal Reserve kept the fed funds rate steady at 5.25%-5.5% for a third consecutive meeting in December 2023, in line with expectations but indicated 75bps cuts in 2024. Policymakers said that recent indicators suggest that economic growth has slowed and job gains have moderated but remain strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated. The central bank also published new projections. GDP growth is expected higher this year (2.6% vs 2.1% in the September projection), but slightly lower in 2024 (1.4% vs 1.5%). Also, PCE inflation was revised lower for both 2023 (2.8% vs 3.3%) and 2024 (2.4% vs 2.5%) as well as core PCE inflation which is seen at 3.2% in 2023 (vs 3.7%) and 2.4% (vs 2.6%) next year. Unemployment projections remained steady at 3.8% for 2023 and 4.1% for next year. The so-called dot plot showed the median year-end 2024 projection for the federal funds rate fell to 4.6% from 5.1% seen in September.
2023-12-13
Fed to Temper Expectations of Earlier Rate Cuts
The Federal Reserve is widely expected to keep the fed funds rate steady at 5.25%-5.5% for a third consecutive meeting in December 2023, and push back against expectations of rate cuts early next year. Back in September, the Fed's dot plot indicated two cuts in 2024, but Chair Powell recently deemed it premature to discuss rate decreases. Moreover, the central bank will release new economic and rate forecasts. As expected, headline inflation has been decelerating, reaching 3.1% in November. However, the core rate remains stubbornly high at 4%, double the Fed's 2% target. Also, the labor market remains robust, despite subtle indications of a slowdown.
2023-12-13
Fed to Move Carefully on Interest Rates
The risk of the Federal Reserve excessively raising interest rates, which could over-restrain the economy, has now reached a more balanced state with the risk of not increasing rates enough to rein in inflation, Fed Powell implied in remarks at Spelman College in Atlanta. "The full effects of our tightening have likely not yet been felt. The forcefulness of our response to inflation also helped maintain the Fed's hard-won credibility, ensuring that the public's expectations of future inflation remain well-anchored,". Powell, aligning with recent colleagues' remarks, emphasized it was too early to declare the Fed's inflation fight over, noting a 3.0% annual price increase based on the central bank's target metric, while October saw a 3.5% rise when excluding food and energy costs—a gauge the Fed deems a more accurate reflection of inflation trends. "We are prepared to tighten policy further if it becomes appropriate to do so," he said.
2023-12-01
The Federal Reserve's actions and statements are key indicators of the United States' monetary policy, affecting the economy, interest rates, inflation, and employment. The nuances and projections discussed are rooted in economic principles and indicators.
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Federal Funds Rate: This is the interest rate at which depository institutions lend reserve balances to other banks overnight. It's a crucial tool for the Fed to manage economic growth, inflation, and employment. The current rate at 5.25%-5.5% and the indication of potential 75 basis point cuts in 2024 demonstrate the Fed's approach to balancing economic expansion while curbing inflation.
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Economic Indicators: The Fed considers various indicators like Gross Domestic Product (GDP), which measures the country's economic output. The GDP growth projections for 2023 and 2024 reflect the Fed's outlook on economic performance.
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Inflation: The Fed monitors inflation closely, specifically the Personal Consumption Expenditures (PCE) price index and the core PCE (excluding food and energy). The revised projections of lower inflation rates for both 2023 and 2024 suggest a vigilant stance towards controlling price rises.
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Unemployment: The Fed keeps an eye on the unemployment rate, indicating the health of the labor market. Projections remaining steady at 3.8% for 2023 and 4.1% for 2024 showcase the Fed's confidence in sustaining a low unemployment rate.
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Dot Plot: This visual representation of policymakers' anonymous expectations for the federal funds rate at the end of the year indicates a shift in median projections. The reduction from 5.1% to 4.6% in the median year-end 2024 projection reflects potential adjustments to monetary policy.
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Chair Powell's Remarks: Powell's statements emphasize the Fed's cautious approach in balancing inflation and economic growth. His reference to the impact of tightening policy, inflation metrics, and the need to maintain credibility outlines the Fed's current stance.
Overall, the Fed's actions and communications are aimed at maintaining a delicate balance between economic growth and inflation control, with a keen eye on employment indicators. These decisions significantly impact financial markets, lending rates, borrowing costs, and consumer behavior, making them crucial for understanding the economic landscape.
