Fed interest rate history · 2020
The Fed Funds Rate in 2020
In 2020, the Federal Reserve cut its benchmark rate from 1.75% to 0.25%, for a yearly average of 0.5% — the 10th-highest of the 18 years on record. Here's the month-by-month path, what the Fed did and why, how the UK and Europe compared, and where it sits against the 3.75% of today.
- 2020 average 0.5% high 1.75% · low 0.25%
- Net move -1.50 pts 1.75% → 0.25%
- vs today 3.75% in 2026
- 2009–2026 average 1.55% long-run norm
2020 month by month
The rate began 2020 at 1.75% and ended it at 0.25%. Along the way the Fed brought it down in 1 — a net reduction of 1.50 points across the year. Its high was 1.75% and its low 0.25%. The chart above traces that path; hover any month to read the exact level.
What the Fed did in 2020, and why
The Fed cut its benchmark back to near zero in an emergency response to the COVID-19 pandemic, and launched massive bond-buying.
The Fed sets this rate to serve its "dual mandate" — stable prices and maximum employment. When inflation runs hot it raises the benchmark to cool borrowing and demand; when the economy weakens it cuts to encourage activity. In 2020 the rate averaged 0.5%, which makes the year the 10th-highest of the 18 years on record. For context, the benchmark has averaged 1.55% across the whole 2009–2026 record and ran about 3.05% on average through the 2020s, so 2020 sat below its own decade.
What it meant for your money
The federal funds rate is the wholesale price of money, and it filters into almost every rate a household touches. When it sits low, as in 2020, the interest on credit cards, car loans and other variable-rate debt tends to be cheap, while the yield on savings accounts, CDs and money-market funds is thin. Fixed mortgage rates take their cue more from long-term Treasury yields than from the Fed directly, but they generally drift in the same direction. You can see that year's home-loan cost in our mortgage-rate history for 2020.
The US in global context
The Fed wasn't acting in isolation. Entering 2020, the Bank of England held its headline rate near 0.71% and the European Central Bank near -0.5%, against the Federal Reserve's 1.75%. The levels differ — and each bank measures its rate slightly differently — but the world's major central banks tend to move through the same broad cycle, tightening and easing together as the same global forces of growth and inflation play out. To see the full three-way comparison over time, view the US/UK/Europe chart on the main study.
How 2020 compares
A year earlier, in 2019, the rate averaged 2.25% and ended at 1.75%. The following year, 2021, it averaged 0.25%. Set against today's 3.75%, 2020's 0.5% average was lower. The Fed sets only the short end of the interest-rate structure; see how the whole Treasury yield curve looked in 2020.
This is one year of the story. For the full picture — every month since 2009, the zero years, the great tightening, and the UK/Europe comparison — see the Federal Reserve interest rate history, 2009–today.
The Fed rate in 2020 — FAQ
What was the federal funds rate in 2020?
In 2020 the Fed's benchmark fell from 1.75% at the start of the year to 0.25% by year-end, averaging 0.5% (a high of 1.75% and a low of 0.25%).
Did the Fed raise or cut rates in 2020?
The rate cut 1.50 points on net, stepping down in 1 month across 2020, from 1.75% to 0.25%. The Fed cut its benchmark back to near zero in an emergency response to the COVID-19 pandemic, and launched massive bond-buying.
How does the 2020 rate compare with today?
In 2020 the rate averaged 0.5%, versus 3.75% today. Across the full 2009–2026 record the benchmark has averaged 1.55%, ranging from 0.25% to 5.5%.
What were UK and European interest rates in 2020?
At the start of 2020, the Bank of England sat near 0.71% and the European Central Bank near -0.5%, against the Federal Reserve's 1.75%. Each central bank defines its headline rate a little differently, but all three tend to move through the same broad cycle.
Why did the Fed move rates in 2020?
The Fed cut its benchmark back to near zero in an emergency response to the COVID-19 pandemic, and launched massive bond-buying.
