Federal funds rate level in the United States 1990-2019

The federal funds rate rose to 1.55 percent in 2019 after an unprecedented time below 0.2 percent after the Financial Crisis. The federal funds rate is the interest rate from the Federal Reserve, the central bank in the United States. It is a very important financial indicator and analysts all over the world watch this rate.

What is a central bank rate?

The federal funds rate is the rate at which financial institutions can borrow overnight from other depository institutions. These overnight loans are vital for banks because they ensure that the bank has constant access to cash, guaranteeing liquidity in the financial system. However, a higher rate means banks prefer to hold their money, slowing the loans issued and causes a decrease in the money supply. While this slows the economy, it also reduces inflation.

Historic perspective

The history of the federal funds rate shows ups and downs that follow the business cycle. When there is a recession, the rate drops, slowly increasing after the economy recovers. In addition to aggressive asset purchase programs, some central banks, including the European Central Bank, introduced negative interest rates. It remains to be seen how the Federal Reserve and other central banks will react to the next crisis.

Federal funds rate level in the United States from 1990 to 2019

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Source

Release date

2020

Region

United States

Survey time period

1990 to 2019

Supplementary notes

Rates as of December of each year.

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Statistics on "Financial market in the United States"

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