Current Federal Reserve Interest Rates

Today's Fed Funds Rate Is 1.0 Percent

The current federal funds rate is 1.0 percent. The Federal Reserve expects to raise rates two more times in 2017, to 1.5 percent.  It signaled it will raise rates to 2 percent in 2018 and 3 percent in 2019. For more, see U.S. Economic Outlook.

It first raised interest rates to 0.5 percent in December 2015. That's after being at zero since 2008. The fed funds rate controls short-term interest rates. These include banks' prime rate, the LIBOR, most adjustable-rate and interest-only loans, and credit card rates. 

FOMC Raised Rates to 1.0 Percent on March 15, 2017

Janet Yellen announcing current fed funds rate
Federal Reserve Board Chair Janet Yellen holds a news conference after the central bank announced an increase in the benchmark interest rate following a Federal Open Market Committee meeting December 14, 2016 in Washington, DC. Photo: Chip Somodevilla/Getty Images

The Federal Open Market Committee raised the fed funds rate a quarter point to 1.0 percent on March 15, 2017. That's just three months after it raised it to 0.75 percent on December 14, 2016. The Fed's first rate increase after the recession was on December 15, 2015, when it raised it to 0.5 percent. 

The Fed finished tapering its quantitative easing program in 2013. That was a massive expansion of the Fed's open market operations tool. It still has $4 trillion of debt on its books from QE. It won't begin selling its debt until rates are normalized at 2.0 percent. More

5 Steps That Protect You From Rising Interest Rates

Couple protecting themselves from rising interest rates
It's easy to protect yourself from rising interest rates if you know how. Photo: Gary Burchell/Getty Images

Find out how the Fed's higher rates affect your savings, your purchases, and your loans. Here are five things you can do right now to protect your finances. More

How Exactly Does the Fed Change the Fed Funds Rate?

FOMC members
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The FOMC sets a target for the fed funds rate at its regular meeting. This federal interest rate is charged for fed funds, which are loans made by banks to each other to meet the Fed reserve requirement. Technically, these rates are set by the banks themselves, not the Federal Reserve. These rates rarely vary from the target rate. More

How the Fed Funds Rate Works

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Each month the Federal Reserve, through the FOMC, targets a specific level for the fed funds rate. This rate directly influences other short-term interest rates, such as deposits, bank loans, credit card interest rates, and adjustable-rate mortgages. By lowering the fed funds rate so dramatically, the Fed kept funds available. It signaled financial markets that it would act decisively to keep them functioning. More

How Are Other Interest Rates Determined?

Interest only loans allow this couple to buy their first house
Low interest rates made homeownership more affordable. Unfortunately, many people didn't realize they weren't paying off the loan. Photo: Ariel Skelley/Getty Images

The fed funds rate is probably the most significant economic indicator in the world. Its importance is psychological as well as financial. In fact, it only directly impacts the prime lending rate and adjustable rate mortgages. The ​10-year Treasury note sets longer-term conventional mortgage rates. Find out how the two interplay in controlling recession and inflation. More

Historical Fed Funds Rate

U.S. Federal Reserve Chairman Ben Bernanke
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The Fed lowered the rate by a half point, to 0.25 percent, on December 16, 2008, the 10th rate cut in a little over a year. Previous cuts include:

  • Sep 18 07: A 1/2 point cut to 4.75%.
  • Oct 31 07: A 1/4 point cut to 4.5%.
  • Dec 11 07: A 1/4 point cut to 4.25%.
  • Jan 22 08: A 3/4 point cut to 3.5%.
  • Jan 30 08: A 1/2 point cut to 3%.
  • Mar 18 08: A 3/4 point cut to 2.25%.
  • Apr 30 08: A 1/4 point cut to 2%.
  • Oct 8 08: A 1/2 point cut to 1.5%.
  • Oct 29 08: A 1/2 point cut to 1%.

The Fed's aggressive expansionary monetary policy was needed to address the 2008 financial crisis. More

Low Interest Rates Create Asset Bubbles Instead of Inflation

Gold Dollar
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Many people worried that the Fed's stimulus programs would create inflation. It didn't happen because former-Fed Chairman Ben Bernanke wound down most of the programs that steered the worlds' largest economy away from collapse. He also outlined a plan to absorb money the Fed has pumped into banks since August 2007. Instead, the Fed's policies created asset bubbles in commodities not measured in the CPI: bond, gold, stocks and the dollar itself. More

Historical LIBOR Rates

USA - Business - JPMorganChase to Buy Bear Sterns
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After the Fed bailed out Bear Stearns, it thought the crisis was over. In April 2008, the LIBOR rate started to diverge from the fed funds rate. The Fed lowered the fed funds rate, but LIBOR continued to rise. Despite the Fed's reassurance, banks continued to panic, and were unwilling to lend to each other. They were afraid of receiving subprime mortgages as collateral. By October 2008, the fed funds rate was 1.5%, but LIBOR was 4.3%. This was the financial crisis of 2008. More

How the Fed Intervened Throughout the Financial Crisis

too big to fail
A demonstrator holds up a sign behind U.S. Treasury Secretary Henry Paulson (L) and Federal Reserve Board Chairman Ben Bernanke (R) during a hearing before the Senate Banking, Housing and Urban Affairs Committee September 23, 2008 on Capitol Hill in Washington, DC. The Bush administration officials were testifying about a proposed $700 billion bailout that they hope will stabilize the faltering U.S. financial system. Many members of Congress have expressed anger at the plan they say will pay for Wall Street's mistakes at taxpayers' expense. Photo by Chip Somodevilla/Getty Images

In August 2007, banks became fearful of loaning each other funds, causing the LIBOR rate to rise. The Fed initially tried to calm this panic by adding funds to the discount window, hoping that this would restore liquidity and confidence in financial markets. When that didn't work, the Fed realized it needed to lower the fed funds rate. By 2008, the Fed bailed out Bear Stearns, bought AIG, and made nearly unlimited funds available to banks to prevent global financial market collapse. More

A Primer on the Subprime Mortgage Crisis

The first clue to the recession to come was in the housing market, when subprime mortgages started to default. During the real estate boom, mortgages were made to subprime borrowers with poor credit history. These mortgages were hidden in packages resold by banks in the secondary market. Hedge funds, banks, and other investors bought them, thinking they were solid investments because credit rating agencies like Standard & Poor's said so.

When borrowers defaulted, financial firms like Lehman Brothers went bankrupt. This caused a panic, since no one really knew how big the problem was....or still is, for that matter. More

Operation Twist Didn't Help Housing

Operation Twist was a $400 billion program that was supposed to boost the housing market and economic growth. But did it? The Fed bought billions of mortgage-backed securities from banks. When these matured, the Fed will bought more. That's good. But the second part of Operation Twist -- the "Twist" -- was designed to keep long-term interest rates low. The Fed sold off the short-term Treasury bills it held, using the proceeds to buy long-term Treasury notes and bonds.

Unfortunately, the Fed didn't address the real problem with housing -- massive foreclosures in the pipeline. It can't create demand, and no one wants to buy a house if they know it won't increase in value. For that reason, the Fed's Operation Twist was like pushing a string -- and it didn't help housing.

Inflation Frequently Asked Questions

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Bernanke said that the primary role of the Fed is to control the public's expectation of inflation. This means that, in a healthy economy, the Fed would rather have higher interest rates to stifle inflation. That makes the Fed's willingness to lower the fed funds rate so decisively all the more dramatic. Learn how inflation affects you and how the Fed manages it. More