Fed Funds Rate History with Its Highs, Lows, and Charts

Fed Funds Rate History with Its Highs, Lows, and Charts

How Fed Rate Changes Have Changed Through History

The Federal Reserve prefers to keep the fed funds rate in a 2% to 5% sweet spot that maintains a healthy economy. In this range, the nation's gross domestic product grows between 2% and 3% annually, and the natural unemployment rate is between 4.5% and 5%. Price increases remain below the Fed's inflation target of a 2% core rate. The fed funds rate remained 2.5% as of June 19, 2019.

There were times in history when the nation's benchmark interest rate was well above this sweet spot 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% in 1979 and 1980 to combat double-digit inflation that began in 1973 after President Nixon disengaged the dollar from the gold standard. Inflation tripled from 3.9% to 9.6%. 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 Dec. 17, 2008, the 10th rate cut in a little more than a year. It didn't raise rates until December 2015.

Before this, the lowest fed funds rate was 1% 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 charts below show 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.

Fed Chair: Arthur Burns January 1970—March 1978

1971: GDP = 3.3%, Unemployment = 6.0%, Inflation = 3.3% 

Date Fed Funds Rate Event
Jan 12 4.25% Expansion
Feb 9 3.75% ^
Mar 9 5.0% Inflation at 4.4% year-over-year.
Jul 27 5.5% Nixon shock. Weakened gold standardTariffs.
Aug 24 5.75% Wage-price controls
Oct 19 5.25% Fed lowered rate to boost growth.
Nov 16 5.0% ^

1972: GDP = 5.3%, Unemployment = 5.2%, Inflation = 3.4%

Mar 21 5.5% Nixon devalued dollar, creating inflation.
Dec 19 5.75% Fed raised rate to combat 3.5% YOY inflation.

 

1973: GDP = 5.6%, Unemployment = 4.9%, Inflation = 8.7% 

Jan 16 6.0% Fed raised rates to combat 3.6% inflation.
Feb 13 6.5% ^
Mar 20 7.0% ^
Apr 17 7.25% Inflation at 5.1%.
May 15 7.5% - 7.75% Inflation at 5.5%.
Jun 19 8.5% Inflation at 6.0%.
Jul 17 10.25% ^
Aug 21 11.0% OPEC embargo worsened inflation in October.

 

1974: GDP = -0.5%, Unemployment = 7.2%, Inflation = 12.3%

Feb 20 9.0% Recession had begun in November 1973.
Mar 18 10.0% Embargo ended in March.
Apr 16 11.0% Fed raised rates to stop inflation
Jul 16 13.0% Inflation at 11.5%. Ford replaced Nixon in August.
Nov 19 9.25% Fed lowered rates to end recession despite 12% YOY inflation.
Dec 17 8.0% ^

 

1975: GDP = -0.2%, Unemployment = 8.2%, Inflation = 6.9%

Jan 21 7.0% Stagflation.
Feb 19 6.0% Economy contracted 4.8% in first quarter with inflation at 11.2%
Mar 18 5.75% Recession ended.
Apr 15 5.25% Inflation at 10.2%.
Jun 17 6.25% Inflation at 9.2%.
Sep 16 6.5% Inflation falls to 7.9%.

 

1976: GDP = 5.4%, Unemployment = 7.8%, Inflation = 4.9%

Jan 20 4.75% Rate lowered from October through January.
May 18 5.5% Raised in April and May.
Oct 19 5.0% Official end of gold standard.
Nov 16 4.75% Lowered from July - November.

 

1976: GDP = 5.4%, Unemployment = 7.8%, Inflation = 4.9%

Jan 20 4.75% Rate lowered from October through January.
May 18 5.5% Raised in April and May.
Oct 19 5.0% Official end of gold standard.
Nov 16 4.75% Lowered from July - November.

 

1977: GDP = 4.6%, Unemployment = 6.4%, Inflation = 6.7%

Aug 16 6.0% Inflation rises to 7% in April.
Sep 10 6.25% Inflation at 6.4%.
Oct 18 6.5% 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 17 6.75% Inflation rises to 6.8%.
Apr 18 7.0%
May 16 7.5%
Jun 20 7.75%
Aug 15 8.0% Inflation rises to 7.9%.
Sep 19 8.5%
Oct 17 9.0% Inflation at 8.9%.
Nov 21 9.75%
Dec 19 10.0% 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 17 10.25% Inflation at 10.5%.
Jul 11 10.5%
Aug 14 11.0%
Sep 18 11.5% Inflation rises to 11.9%.
Oct 6 13.0% The Fed began targeting the money supply.
Oct 22 15.5% Conference call raised rates 2.5 points.
Nov 20 14.0% Inflation at 12.6%.

 

1980: GDP = -0.3%, Unemployment = 7.2%, Inflation = 12.5%

Feb 5 15.0% Recession began in January. Inflation at 14.6%.
Mar 18 20.0%
May 20 11.5 Conference calls on April 29 and May 6 lowered rates.
Jun 5 8.5% Recession ends in July.
Aug 12 10.0% Raised rates back up. Inflation at 12.9%.
Sep 16 11.0%
Oct 21 12.0%
Nov 18 18.0% Inflation eases to 12.6%.
Dec 12 20.0% Conference call.
Dec 19 18.0% Lowered two points.

 

1981: GDP = 2.5%, Unemployment = 8.5%, Inflation = 8.9%

Feb 3 20.0% Reagan took office. Volcker raised rates again.
Apr 28 16.0% Conference call lowered rates.
May 18 20.0% Recession began in July.
Nov 17 13.0% Gradually lowered rates over 6 months.
Dec 22 12.0% Inflation 8.9%.

1982: GDP = -1.8%, Unemployment = 10.8%, Inflation = 3.8%

Mar 30 15.0% Gradually raised rates 3 points over 4 months.
Jul 15 13.0% Conference call. Gradually lowered rates.
Aug 24 9.5% Gradually lowered rates.
Nov 16 9.0% Recession ends.
Dec 21 8.5% Inflation at 3.8%.

 

1983: GDP = 4.6%, Unemployment = 8.3%, Inflation = 3.8%

May 24 9.5% Gradually raised rates over 5 months.
Aug 23 9.66% Raised from May to August.
Oct 4 9.25% Lowered from August to October

 

1984: GDP = 7.2%, Unemployment = 7.3%, Inflation = 3.9%

Mar 27 10.5% Raised rates again.
Jul 17 11.5%
Aug 21 11.75% Raised from March to August.
Oct 2 10% Began lowering again.
Nov 7 9.5%
Dec 18 8.25% Lowered from September to December.

 

1985: GDP = 4.2%, Unemployment = 7.0%, Inflation = 3.8%

Mar 26 9.0% Raised from February to mid-March.
May 21 7.75% Began lowering again.
Aug 20 8.0% Raised again.
Dec 17 7.75% Lowered again.

1986: GDP = 3.5%, Unemployment = 6.6%, Inflation = 1.1%

Apr 1 6.75% Continued lowering rates.
Aug 19 5.66% Lowered until August.
Dec 16 6.0% Began raising rates again.

 

Fed Chair Alan Greenspan (August 1987—January 2006)

1987: GDP = 3.5%, Unemployment = 5.7%, Inflation = 4.4%  

May 19 6.75% Continued raising rates to fight inflation.
Sept 22 7.25% ^
Oct 19 6.75% Lowered after Black Monday stock market crash.

 

1988 : GDP = 4.2%, Unemployment = 5.3%, Inflation = 4.4%

Feb 10 6.5% Continued lowering.
Mar 29 7.5% Began raising to fight inflation
Aug 16 8.25% ^
Dec 9.75% ^

 

1989: GDP = 3.7%, Unemployment = 5.4%, Inflation = 4.6%

Dec 8.25% S&L crisis. Fed lowered rates to calm markets.

 

1990: GDP = 1.9%, Unemployment = 6.3%, Inflation = 6.1%

Jul 13 8.0% Recession began in July. .
Oct 29 7.75% Continued lowering rates to boost economy despite inflation
Nov 13 7.5% ^
Dec 7 7.25% Conference call.
Dec 18 7.0% Economy contracted 3.6% in Q4.

 

1991: GDP = -0.1%, Unemployment = 7.3%, Inflation = 3.1%

Jan 9 6.75% Economy contracted 1.9%
Feb 1 6.25%
Mar 8 6.0% Recession ended.
Apr 30 5.75% Conference call.
Aug 6 5.5%
Sep 13 5.25% Conference call.
Oct 31 5.0% Conference call.
Nov 6 4.75% Fed continued lowering rates to fight unemployment.
Dec 6 4.5% ^
Dec 20 4.0% ^

 

1992: GDP = 3.5%, Unemployment = 7.4%, Inflation = 2.9%

Apr 3.75% Fed lowered rates to fight unemployment.
Jul 1 3.25% ^
Aug 18 3.0% ^

 

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 4 3.25% Fed raised rates to keep economy healthy.
Mar 22 3.5%
Apr 18 3.75% Conference call.
May 17 4.25%
Aug 16 4.75%
Nov 15 5.5% Raised rates.

 

1995: GDP = 2.7%, Unemployment = 5.6%, Inflation = 2.5%

Feb 1 6.0% Raised rates.
Jul 6 5.75% Lowered rates.
Dec 19 5.5%

 

1996: GDP = 3.8%, Unemployment = 5.4%, Inflation = 3.3%

Jan 31 5.25% Kept rates low despite inflation.

 

1997: GDP = 4.4%, Unemployment = 4.7%, Inflation = 1.7% 

Mar 25 5.5% ^

 

1998: GDP = 4.5%, Unemployment = 6%, Inflation = 1.6%

Sep 29 5.25% LTCM crisis.
Oct 15 5.0%
Nov 17 4.75%

 

1999: GDP = 4.8%, Unemployment = 6%, Inflation = 2.7%

 

Jun 30 5.0% Raised rates.
Aug 24 5.25%
Nov 16 5.5%

 

2000: GDP = 4.1%, Unemployment = 6%, Inflation = 3.4%

Feb 2 5.75% Raised rates despite stock market decline in March
Mar 21 6.0% ^
May 16 6.5% ^

 

2001: GDP = 1.0%, Unemployment = 6%, Inflation = 1.6%

Jan 3 6.0% Bush took office.
Jan 31 5.5% ^
Mar 20 5.0% Recession began. Fed lowered rates to fight it.
Apr 18 4.5% ^
May 15 4.0% ^
Jun 27 3.75% EGTTRA tax rebate enacted.
Aug 21 3.5%
Sep 17 3.0% 9/11 attacks.
Oct 2 2.5% Afghanistan War.
Nov 6 2.0% Recession ended.
Dec 11 1.75%

 

2002: GDP = 1.7%, Unemployment = 6%, Inflation = 2.4%

Nov 6 1.25% Fed lowered rates to fight sluggish growth.

 

2003: GDP = 2.9%, Unemployment = 6%, Inflation = 1.9%

Jun 25 1.00% JGTRRA tax cuts enacted.

 

2004: GDP = 3.8%, Unemployment = 6%, Inflation = 3.3%

Jun 30 1.25% Low rates pushed interest-only loans. .
Aug 10 1.5% Helped cause Subprime Mortgage Crisis
Sep 21 1.75% ^
Nov 10 2.0% ^
Dec 14 2.25% ^

 

2005: GDP = 3.5%, Unemployment = 6%, Inflation = 3.4%

Feb 2 2.5% Borrowers could not afford mortgages when rates reset in 3rd year.
Mar 22 2.75% ^
May 3 3.0% ^
Jun 30 3.25% ^
Aug 9 3.5%
Sep 20 3.75%
Nov 1 4.0%
Dec 13 4.25%

 

Fed Chair Ben Bernanke (February 2006—January 2014)

2006: GDP = 2.9%, Unemployment = 6%, Inflation = 2.5% 

Jan 31 4.5% Raised to cool housing market bubble. More homeowners default.
Mar 28 4.75% ^
May 10 5.0% ^
Jun 29 5.25% ^

 

2007: GDP = 1.9%, Unemployment = 6%, Inflation = 4.1%

Sep 18 4.75% Home sales fell.
Oct 31 4.5%
Dec 11 4.25% LIBOR rose. Stock market peaked. Recession began.

 

2008: GDP = -0.1%, Unemployment = 6%, Inflation = 0.1%

Jan 22 3.5%
Jan 30 3.0% Tax rebate.
Mar 18 2.25% Bear Stearns bailout.
Apr 30 2.0% Lehman fails. Bank bailout approved. AIG bailout.
Oct 8 1.5% ^
Oct 29 1.0% ^
Dec 16 0.25% Effectively zero. Lowest fed fund rates possible
  • Between2008 and 2015, the Fed kept the rate at zero. Recession ended in June 2009.

Fed Chair Janet Yellen (February 2014—February 2018)

2015: GDP = 2.9%, Unemployment = 6%, Inflation = 0.7% 

Dec 17 0.5% Growth stabilized so Fed began raising rates.

 

2016: GDP = 1.6%, Unemployment = 4.6%, Inflation = 2.1% 

Dec 15 0.75% Fed maintained steady increase in rates.

 

2017: GDP = 2.2%, Unemployment = 4.1%, Inflation = 2.1%

Mar 16 1.0% Fed was steady on its path of normalizing its benchmark rate.
Jun 15 1.25% ^
Dec 14 1.5% ^

 

Fed Chair Jerome Powell (Since February 2018)

2018: GDP = 2.95, Unemployment = 3.9%, Inflation = 1.9%

Mar 22 1.75% Fed projects steady growth.
Jun 14 2.0% ^
Sep 27 2.25% ^
Dec 19 2.5% Fed stopped raising rates in 2019.

(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.)

By The Balance, KIMBERLY AMADEO

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Forex, stocks, commodities Trader & Markets Analyst. Makkaba Co., Ltd. ST&C

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