Fed Funds Rate History with Its Highs, Lows and Chart

Why the Fed Changes Rates

Fed chairs
••• Photo: Mark Wilson/Getty Images

The Federal Reserve prefers to keep the fed funds rate between 2 and 5 percent. It's the sweet spot that maintains a healthy economy. That's where the nation's gross domestic product grows between 2 percent and 3 percent annually. It has a natural unemployment rate between 4.5 percent and 5 percent. Price increases remain below the Fed's inflation target of a 2 percent core inflation rate. The current fed funds rate is 2.25 percent.

But there were times in history where the nation's benchmark interest rate was well above its sweet spot. That was to curb runaway inflation. Between 2008 and 2015, it was well below the target to stimulate economic growth. Once you see how the Fed changed the fed funds rate, you will understand how it managed inflation and recession.

Highest Fed Funds Rate

The fed funds rate reached a high of 20 points in 1979 and 1980. That was to combat double-digit inflation. 

That bout of inflation began in 1973 after President Nixon weakened the dollar by disengaging it from the gold standard. Inflation tripled from 3.9 percent to 9.6 percent. The Fed doubled interest rates from 5.75 to a high of 11 points. Inflation continued to remain in the double-digits through all of 1974. It lasted until April 1975. The Fed kept raising the fed funds rate to a peak of 13 in July 1974, and then dramatically lowered the rate, reaching 7.5 by January 1975.

These sudden changes, known as stop-go monetary policy, confused businesses. They kept prices high to stay ahead of the Fed's interest rate spikes. That only made inflation worse. Fed leaders learned that managing inflation expectations was a critical factor in controlling inflation itself.

In 1979, Federal Reserve chair Paul Volcker ended the Fed's stop-go policy.

He raised rates and kept them there to finally end inflation. That created the 1980 recession, but double-digit inflation hasn't been a threat since. 

Lowest Fed Funds Rate

The all-time low was 0.25 percent. That's effectively zero. The Fed lowered it to this level on December 17, 2008, the 10th rate cut in a little over a year. It didn't raise rates until December 2015

Before this, the lowest fed funds rate was 1 percent in 2003 to combat the 2001 recession. At the time, there were fears that the economy was drifting toward deflation.

Fed Funds Rate History

The chart below shows the targeted fed funds rate changes since 1971. Until October 1979, the Federal Open Market Committee didn't announce its target interest rate after meetings. The target rate was inferred by an archived chart published by the Federal Reserve Bank of New York. The bank adjusted the rate through open market operations. As a result, the rates changed gradually, even in between meetings. Businesses were forced to guess what the rates would be. The Fed tried to fight inflation without managing the expectations of inflation.

In 1979, the Fed began targeting the money supply to fight inflation. As a result, the fed funds rate fluctuated a great deal between 1979 and 1982.

In 1982, the  Fed returned to targeting the fed funds rate specifically.

In February 1994, the FOMC formally announced its policy changes for the first time. Since then, its announcements make it clear what it wants the interest rate to be. 

The Federal Reserve Bank of St. Louis publishes a complete history of the effective fed funds rate since 1954. The Fed also has transcripts of all meetings since 1936.

Date     Fed Funds Rate Event
Fed Chair Arthur Burns (January 1970 - March 1978)
1971: GDP = 3.3%, Unemployment = 6.0%, Inflation = 3.3% 
Jan 124.25%Expansion. 
Feb 93.75%
Mar 95.0%Inflation at 4.4% year-over-year.
Jul 275.5%Inflation 4.4%.
Aug 245.75%Nixon shock. Wage-price controls. Weakened gold standard. Tariffs. Fed lowered rate to boost growth. 
Oct 195.25%
Nov 165.0%
1972: GDP = 5.3%, Unemployment = 5.2%, Inflation = 3.4% 
Mar 215.5%Nixon devalued dollar, creating inflation. Fed raised rate to combat 3.5% YOY inflation. 
Dec 195.75%
1973: GDP = 5.6%, Unemployment = 4.9%, Inflation = 8.7% 
Jan 166.0%Fed raised rates to combat 3.6% inflation.
Feb 136.5%
Mar 207.0% 
Apr 177.25%Inflation at 5.1%.
May 157.5% - 7.75%Inflation at 5.5%.
Jun 198.5%Inflation at 6.0%.
Jul 1710.25% 
Aug 2111.0%OPEC embargo worsened inflation in October. 
1974: GDP = -0.5%, Unemployment = 7.2%, Inflation = 12.3% 
Feb 209.0%Fed raised rates to stop inflation despite recession which had begun in November 1973. Embargo ended in March.
Mar 1810.0%
Apr 1611.0%
Jul 1613.0%Inflation at 11.5%. Ford replaced Nixon in August.
Nov 199.25%Fed lowered rates to end recession despite 12% YOY inflation.
Dec 178.0%
1975: GDP = -0.2%, Unemployment = 8.2%, Inflation = 6.9%
Jan 217.0%Stagflation. Economy contracted 4.8% in first quarter with inflation at 11.2%.
Feb 196.0%
Mar 185.75%Recession ended.
Apr 155.25%Inflation at 10.2%.
Jun 176.25%Inflation at 9.2%.
Sep 166.5%Inflation falls to 7.9%.
1976: GDP = 5.4%, Unemployment = 7.8%, Inflation = 4.9%
Jan 204.75%Rate lowered from October through January.
May 185.5%Raised in April and May.
Oct 195.0%Official end of gold standard
Nov 164.75%Lowered from July - November.
1977: GDP = 4.6%, Unemployment = 6.4%, Inflation = 6.7%
Aug 166.0%Inflation rises to 7% in April.
Sep 106.25%Inflation at 6.4%.
Oct 186.5%Raised again in September and October.
Fed Chair William Miller (March 1978 - August 1979)
1978: GDP = 5.5%, Unemployment = 6.0%, Inflation = 9.0%
Jan 176.75%Inflation rises to 6.8%.
Apr 187.0% 
May 167.5% 
Jun 207.75% 
Aug 158.0%Inflation rises to 7.9%.
Sep 198.5% 
Oct 179.0%Inflation at 8.9%.
Nov 219.75% 
Dec 1910.0%Raised each month from April through December.
Fed Chair Paul Volcker (August 1979 - August, 1987)
1979: GDP = 3.2%, Unemployment = 6.0%, Inflation = 13.3% 
Apr 1710.25%Inflation at 10.5%.
Jul 1110.5% 
Aug 1411.0% 
Sep 1811.5%Inflation rises to 11.9%.
Oct 613.0%The Fed began targeting the money supply.
Oct 2215.5%Conference call raised rates 2.5 points.
Nov 2014.0%Inflation at 12.6%.
1980: GDP = -0.3%, Unemployment = 7.2%, Inflation = 12.5%
Feb 515.0%Recession began in January. Inflation at 14.6%.
Mar 1820.0%
May 2011.5Conference calls on April 29 and May 6 lowered rates.
Jun 58.5%Recession ends in July.
Aug 1210.0%Raised rates back up. Inflation at 12.9%.
Sep 1611.0% 
Oct 2112.0% 
Nov 1818.0%Inflation eases to 12.6%.
Dec 1220.0%Conference call.
Dec 1918.0%Lowered two points.
1981: GDP = 2.5%, Unemployment = 8.5%, Inflation = 8.9%
Feb 320.0%Reagan took office. Volcker raised rates again.
Apr 2816.0%Conference call lowered rates.
May 1820.0%Recession began in July.
Nov 1713.0%Gradually lowered rates over 6 months.
Dec 2212.0%Inflation 8.9%.
1982: GDP = -1.8%, Unemployment = 10.8%, Inflation = 3.8%
Mar 3015.0%Gradually raised rates 3 points over 4 months.
Jul 1513.0%Conference call. Gradually lowered rates.
Aug 249.5%Gradually lowered rates.
Nov 169.0%Recession ends.
Dec 218.5%Inflation at 3.8%.
1983: GDP = 4.6%, Unemployment = 8.3%, Inflation = 3.8%
May 249.5%Gradually raised rates over 5 months.
Aug 239.66%Raised from May to August.
Oct 49.25%Lowered from August to October
1984: GDP = 7.2%, Unemployment = 7.3%, Inflation = 3.9%
Mar 2710.5%Raised rates again.
Jul 1711.5% 
Aug 2111.75%Raised from March to August.
Oct 210%Began lowering again.
Nov 79.5% 
Dec 188.25%Lowered from September to December.
1985: GDP = 4.2%, Unemployment = 7.0%, Inflation = 3.8%
Mar 269.0%Raised from February to mid-March.
May 217.75%Began lowering again.
Aug 208.0%Raised again.
Dec 177.75%Lowered again.
1986: GDP = 3.5%, Unemployment = 6.6%, Inflation = 1.1%
Apr 16.75%Continued lowering.
Aug 195.66%Lowered until August.
Dec 166.0%Began raising again.
Fed Chair Alan Greenspan (August 1987 - January 2006)
1987: GDP = 3.5%, Unemployment = 5.7%, Inflation = 4.4%  
May 196.75%Continued raising rates to fight inflation.
Sep 227.25%
Oct 196.75%Lowered after Black Monday stock market crash.
1988: GDP = 4.2%, Unemployment = 5.3%, Inflation = 4.4%
Feb 106.5%Continued lowering.
Mar 297.5%Began raising again to fight inflation.
Aug 168.25%
Dec9.75%
1989: GDP = 3.7%, Unemployment = 5.4%, Inflation = 4.6%
Dec8.25%S&L crisis. Fed lowered rates.
1990: GDP = 1.9%, Unemployment = 6.3%, Inflation = 6.1%
Jul 138.0%Recession began in July. Continued lowering rates to boost economy despite inflation.
Oct 297.75%
Nov 137.5%
Dec 77.25%Conference call.
Dec 187.0%Economy contracted 3.6% in Q4.
1991: GDP = -0.1%, Unemployment = 7.3%, Inflation = 3.1%
Jan 96.75%Economy contracted 1.9%.
Feb 16.25% 
Mar 86.0%Recession ended.
Apr 305.75%Conference call.
Aug 65.5% 
Sep 135.25%Conference call.
Oct 315.0%Conference call.
Nov 64.75%Fed continued lowering rates to fight unemployment.
Dec 64.5%
Dec 204.0%
1992: GDP = 3.5%, Unemployment = 7.4%, Inflation = 2.9%
Apr3.75%Fed lowered rates to fight unemployment.
Jul 13.25%
Aug 183.0%
1993: GDP = 2.8%, Unemployment = 5.5%, Inflation = 2.7%. 
Clinton took office in 1993. Fed made no changes.
1994: GDP = 4.0%, Unemployment = 5.5%, Inflation = 2.7%
Feb 43.25%Fed raised rates to keep growth and inflation in a healthy range.
Mar 223.5% 
Apr 183.75%Conference call.
May 174.25% 
Aug 164.75% 
Nov 155.5%Raised rates.
1995: GDP = 2.7%, Unemployment = 5.6%, Inflation = 2.5%
Feb 16.0%Raised rates.
Jul 65.75%Lowered rates.
Dec 195.5% 
1996: GDP = 3.8%, Unemployment = 5.4%, Inflation = 3.3% 
Jan 315.25%Kept rates low despite inflation.
1997: GDP = 4.4%, Unemployment = 4.7%, Inflation = 1.7% 
Mar 255.5% 
1998: GDP = 4.5%, Unemployment = 6%, Inflation = 1.6%
Sep 295.25%LTCM crisis.
Oct 155.0% 
Nov 174.75% 
1999: GDP = 4.8%, Unemployment = 6%, Inflation = 2.7%
Jun 305.0%Raised rates.
Aug 245.25% 
Nov 165.5% 
2000: GDP = 4.1%, Unemployment = 6%, Inflation = 3.4%
Feb 25.75%Raised rates despite stock market decline in March.
Mar 216.0%
May 166.5%
2001: GDP = 1.0%, Unemployment = 6%, Inflation = 1.6% 
Jan 36.0%Bush took office. 
Jan 315.5%
Mar 205.0%Recession began. Fed lowered rates to fight it.
Apr 184.5%
May 154.0%
Jun 273.75%EGTTRA tax rebate enacted.
Aug 213.5% 
Sep 173.0%9/11 attacks.
Oct 22.5%Afghanistan War.
Nov 62.0%Recession ended.
Dec 111.75% 
2002: GDP = 1.7%, Unemployment = 6%, Inflation = 2.4%
Nov 61.25% 
2003: GDP = 2.9%, Unemployment = 6%, Inflation = 1.9%
Jun 251.00%JGTRRA tax cuts enacted.
2004: GDP = 3.8%, Unemployment = 6%, Inflation = 3.3%
Jun 301.25%Low rates pushed interest-only loans. Helped cause Subprime Mortgage Crisis.
Aug 101.5%
Sep 211.75%
Nov 102.0%
Dec 142.25% 
2005: GDP = 3.5%, Unemployment = 6%, Inflation = 3.4%
Feb 22.5%Borrowers could not afford mortgages when rates reset in 3rd year. 
Mar 222.75%
May 33.0%
Jun 303.25%
Aug 93.5% 
Sep 203.75% 
Nov 14.0% 
Dec 134.25% 
Fed Chair Ben Bernanke (February 2006 - January 2014)
2006: GDP = 2.9%, Unemployment = 6%, Inflation = 2.5% 
Jan 314.5%Raised to cool housing market bubble. More homeowners default.
Mar 284.75%
May 105.0%
Jun 295.25%
2007: GDP = 1.9%, Unemployment = 6%, Inflation = 4.1%
Sep 184.75%Home sales fell.
Oct 314.5% 
Dec 114.25%LIBOR rose. Recession began.
2008: GDP = -0.1%, Unemployment = 6%, Inflation = 0.1%
Jan 223.5% 
Jan 30 3.0%Tax rebate.
Mar 182.25%Bear Stearns bailout.
Apr 302.0%Lehman fails. Bank bailout approved. AIG bailout.
Oct 81.5%
Oct 291.0%
Dec 160.25%Effectively zero. The lowest fed funds rate possible.
The Fed kept the rate at zero between 2008 and 2015. Recession ended in June 2009.
Fed Chair Janet Yellen (February 2014 - February 2018)
2015: GDP = 2.9%, Unemployment = 6%, Inflation = 0.7% 
Dec 170.5%Growth stabilized.
2016: GDP = 1.6%, Unemployment = 4.6%, Inflation = 2.1% 
Dec 150.75% 
2017: GDP = 2.2%, Unemployment = 4.1%, Inflation = 2.1%
Mar 161.0%Fed was steady on its path of normalizing its benchmark rate.
Jun 151.25%
Dec 141.5%
Fed Chair Jerome Powell (February 2018 - February 2022)
2018
Mar 221.75%Fed projects steady growth.
Jun 142.0%
Sep 272.25%

(Sources:  Prior to 1990, "Archive," Federal Reserve Bank of New York. " H-15 Data Download," Federal Reserve. Since 1990, "Open Market Archive," Federal Reserve.  "A History of Fed Leaders and Interest Rates," The New York Times, December 16, 2015. "History of Recessions," TheBalance.com. "Inflation," Bureau of Labor Statistics.)