Today’s federal funds rate

What the rate above means

The number at the top of this page is the federal funds rate — the benchmark interest rate set by the Federal Reserve. But there’s an important detail hidden inside that single figure. The Fed doesn’t actually set one exact rate; it sets a target range, a narrow band that is usually a quarter of a percentage point wide. So the real policy is something like “3.50% to 3.75%,” and the Fed then uses its tools to keep the rate banks actually trade at somewhere inside that band. The headline number quoted everywhere — including here — is the upper bound of that range. When someone says “the Fed rate is” a given figure, they almost always mean the top of the band.

That’s why there’s no daily “change” chip beside this rate the way there is on a market-driven number like a Treasury yield. The federal funds rate is not set by traders minute to minute; it’s set by a committee that meets on a schedule. It holds perfectly steady for weeks, and then, when the committee decides, it moves in a clean step — typically a quarter or a half of a percentage point. So the label beside the number isn’t a daily move; it’s a reminder of what the figure represents: the upper bound of the Fed’s target range. Watch it over months, not hours.

It’s worth being precise about why the upper bound became the headline. Before 2008, the Fed announced a single target rate and steered the market to it. Since then it has used a range, because the modern tools it relies on — the interest it pays banks on their reserves, and the rates on its overnight lending facilities — naturally define a band with a floor and a ceiling rather than a single point. The upper bound is simply the cleanest, most stable number to quote, so it became the figure the press, lenders and data providers all settled on. When you compare the rate above with a rate you read somewhere else, make sure you’re comparing upper bound to upper bound, not the top of one range against the midpoint of another.

What the federal funds rate is and how the FOMC sets it

At its core, the federal funds rate is the interest rate banks charge one another to borrow reserves overnight. Banks are required to hold a certain amount of reserves, and on any given night some have a little extra while others are a little short. The ones with a surplus lend to the ones who need it, and the rate they charge for that ultra-short loan is the federal funds rate. It sounds like an obscure bit of banking plumbing, and mechanically it is — but it’s the rate the Federal Reserve has chosen as its primary policy lever, because nudging it up or down ripples outward into the cost of borrowing for everyone.

The body that sets the target is the Federal Open Market Committee, or FOMC. It meets eight times a year on a published calendar, roughly once every six weeks, and at each meeting it decides whether to raise the target range, lower it, or leave it where it is. The committee is guided by what Congress calls the Fed’s dual mandate: keeping prices stable and keeping employment as high as the economy can sustainably support. Almost everything the FOMC does is an attempt to balance those two goals. The Fed can, in genuine emergencies, act between scheduled meetings — it did exactly that in early 2020 — but the normal rhythm is those eight scheduled decisions, which is why the rate moves in occasional steps rather than a smooth curve.

What the Fed is trying to do when it hikes or cuts

Every rate decision comes down to the tug-of-war between the two halves of the dual mandate. When inflation is running hot — prices climbing faster than the Fed wants — the committee raises the federal funds rate. Higher rates make borrowing more expensive and saving more rewarding, which cools spending by households and businesses, softens demand, and eventually takes the pressure off prices. The trade-off is that the same higher rates slow the economy and can push unemployment up, so the Fed can’t simply hike without limit.

When the economy is weak — growth stalling, hiring slowing, unemployment rising — the committee cuts the rate instead. Cheaper borrowing encourages companies to invest and hire and households to spend, which supports the job market. The risk on this side is that too much cheap money for too long can let inflation build back up. So the Fed is perpetually reading incoming data on prices and jobs and asking which side of the mandate needs the most attention right now. A hike is the Fed leaning against inflation; a cut is the Fed leaning against a weak labor market. Understanding that framing tells you most of what you need to know about why the rate is where it is at any moment.

One thing that makes the Fed’s job hard, and worth keeping in mind when you read the rate above, is that rate changes work with a lag. A hike doesn’t cool inflation overnight; it takes months to fully feed through borrowing, spending and hiring, and economists often say the full effect can take a year or more to land. That’s why the Fed sometimes keeps rates “higher for longer” even after inflation has started to ease, or begins cutting before the economy is visibly weak — it’s steering toward where it thinks the economy will be, not where it is today. It also means the rate above reflects judgments made about conditions the Fed was seeing months ago, which is part of why reasonable people can disagree about whether any given setting is too high, too low or about right.

What the rate actually controls in your life

The federal funds rate can feel like something that happens to bankers, not to you. In reality it’s the anchor for a large slice of your financial life — specifically the short-term slice. Because it sets the price of overnight money, it feeds directly into short-term borrowing and lending rates throughout the economy. Your credit-card APR is typically a fixed margin on top of the prime rate, and prime moves in lockstep with the fed funds rate — so a Fed hike shows up on your statement within a cycle or two. The same is true of home-equity lines of credit (HELOCs), many auto loans, and other variable-rate consumer debt: when the Fed moves, these move.

It cuts the other way too, in your favor. When the Fed raises rates, the yield on high-yield savings accounts, money-market funds and short-term Treasury bills climbs, so cash finally earns something. When the Fed cuts, those yields fall back. This is the practical takeaway: the federal funds rate is the dial behind the cost of your revolving debt and the return on your safe cash. If you carry a credit-card balance or a HELOC, a rising fed funds rate makes that debt more expensive and is a strong argument to pay it down; if you’re sitting on savings, a high rate is your chance to park it somewhere that actually pays. The short end of the borrowing world is where this number lives.

The myth that the Fed sets mortgage rates

Here’s the trap almost everyone falls into: assuming that when the Fed cuts, mortgage rates drop, and when the Fed hikes, they climb. It’s intuitive, and it’s wrong. The federal funds rate is an overnight rate. A fixed mortgage is a loan that can run for 30 years. Those two things live at opposite ends of the time spectrum, and they’re driven by different forces. Fixed mortgage rates track the 10-year Treasury yield, which is set by the bond market based on where investors expect inflation and growth to be over the coming decade — not by the Fed’s overnight target.

This is why you’ll see mortgage rates fall in a week the Fed never even met, or rise in the days after a widely cheered Fed cut. The bond market is forward-looking: by the time the Fed actually acts, traders have often already priced the move in, and what matters next is what they expect the Fed to do after that. The Fed still shapes the whole environment — its decisions and its commentary move inflation expectations, which move Treasury yields — but the tight, day-to-day link for a mortgage is to the 10-year Treasury, not to the number on this page. If you’re shopping for a home loan, watch the 30-year mortgage rate and the 10-year note, not the fed funds rate.

The reason the confusion persists is that the two rates usually drift in the same general direction over long stretches, because both ultimately respond to the same economy. In a serious downturn the Fed cuts and long yields tend to fall as well; in an inflationary boom the Fed hikes and long yields tend to rise. That loose correlation is enough to make the myth feel true. But “usually drift together over years” is very different from “the Fed sets the mortgage rate,” and the gap between the two shows up exactly when it matters most — around a Fed decision, when a homebuyer is trying to time a lock. Treat the fed funds rate as background weather for mortgages, not the forecast.

Today’s rate in historical context

A rate means more once you can place it against where it’s been. In the modern series — the data from 2009 forward — the federal funds rate has swung between two extremes. The record low was 0.25%, the near-zero setting the Fed adopted in January 2009 in the depths of the financial crisis, and returned to in 2020 during the COVID shock. At those moments the Fed had effectively pushed borrowing costs as low as they could go to keep the economy from seizing up. The recent peak was 5.5% on the upper bound, reached in July 2023 at the top of the fastest hiking cycle in decades, as the Fed raced to bring down the post-pandemic inflation surge — after which it began cutting again.

Against that backdrop, the rate above tells you which chapter of that story you’re living in: the emergency-low era of cheap money, the aggressive-hiking era of expensive money, or somewhere on the path between them as the Fed normalizes policy. Where today’s number sits in that range says a lot about what the Fed is worried about right now — inflation if rates are high and holding, a softening economy if they’re coming down. For the full history, including how the US compares with the Bank of England and the European Central Bank over the same period, see our federal funds rate study, which charts the whole series and breaks down each phase.

Related tools and guides

This page is the live benchmark and the context; the related pages turn it into decisions. Because the fed funds rate controls the short end, check the Treasury bill rates to see what your cash can earn when the Fed is holding rates high. Because it does not set mortgage rates, use the 30-year mortgage rate and the 10-year Treasury note pages for the numbers a home loan actually follows. For the long view of every Fed move since 2009 and a US/UK/EU comparison, read the federal funds rate study, and browse the rest of the today’s rates board for the full picture of where money is priced right now. If there’s one habit to build from this page, it’s to attack your variable-rate debt when the fed funds rate is high and lock in savings yields while they last, since both track this number closely. This page is general information, not financial advice.