Monthly Fed funds effective rate in the U.S. 1954-2024
The U.S. federal funds effective rate was drastically lowered between February and April 2020. It dropped from 1.58 percent in February that year, down to 0.65 percent in March, and further down to 0.05 percent in April. The lowered rate was a response to the COVID-19 pandemic, as was the case with the Federal Reserve’s quantitative easing during the same period. Following several slight changes in the effective rate since then, it was set at 0.33 percent in April 2022, and it kept increasing in the following months. As of May 2024, the U.S. federal funds effective rate stood at 5.33 percent.
What is the federal funds effective rate?
The U.S. federal funds effective rate determines the interest rate paid by depository institutions, such as banks and credit unions, that lend reserve balances to other depository institutions overnight. Changing the effective rate in times of crisis is a common way to stimulate the economy, as it has a significant impact on the whole economy, such as economic growth, employment, and inflation.
Central bank policy rates
The United States was not the only country to adjust its effective rate, or other depositary interest rates, as a response to the economic effects of the coronavirus pandemic. All over the world, governments and central banks took actions to minimize the economic crisis. Most countries lowered their central bank policy rates in early 2020, and it was not until a year later that most countries started to slowly increase them again.
