The Long ViewNo. 55
Seventy years of the federal funds rate
The Federal Reserve's main policy lever, from the 1950s to today.
The federal funds rate — the rate banks charge one another for overnight loans of reserves — is the Federal Reserve's primary policy tool. Monthly averages of the effective rate go back to July 1954, covering every Fed chair from William McChesney Martin onward.
Source: Federal Reserve Bank of St. Louis (FRED). Shaded areas indicate U.S. recessions as dated by the NBER.
Where it stands
As of September 1, 2026, the effective federal funds rate stood at 3.75%. Since July 1954, it has averaged 4.59%, with a median of 4.25%. Today's reading is higher than 44% of all observations in that span. The high point was 19.10% in June 1981; the low was 0.05% in April 2020.
For comparison, it was 0.08% five years ago, 0.40% ten years ago, and 5.25% twenty years ago.
Average by decade
| 1950s | 1960s | 1970s | 1980s | 1990s | 2000s | 2010s | 2020s |
|---|---|---|---|---|---|---|---|
| 2.36% | 4.18% | 7.10% | 9.97% | 5.15% | 2.96% | 0.61% | 2.85% |
The history
The rate topped 19% in 1981 as the Fed fought inflation, then trended lower over the following decades. After the 2008 financial crisis, and again in 2020, the Fed held its target range near zero. The tightening that began in March 2022 was the fastest since the early 1980s, lifting the target range to 5.25%–5.50% by July 2023.
Why it matters
Monetary policy works with what Milton Friedman called long and variable lags. That is why investors pay as much attention to the Fed's guidance about the future path of rates as to any single decision.
Diurna briefs are compiled from official and exchange data by our publishing system using fixed editorial rules; they describe market moves and do not speculate about causes. This is not investment advice. How we produce the Daily Brief.