The current federal funds rate target range is 3.50%–3.75%, with an effective rate of 3.63% as of June 2026. The Federal Open Market Committee has held rates steady at every meeting in 2026 after cutting three times in the final months of 2025. This rate is the foundation of US monetary policy and touches nearly every borrowing and saving rate in the country.
At a glance: Target range = 3.50%–3.75% | Effective rate = 3.63% | Prime rate = 6.75% | Last change = December 2025
Current Federal Funds Rate (July 2026)
| Rate | Level |
|---|---|
| Federal funds target range | 3.50%–3.75% |
| Federal funds effective rate | 3.63% |
| Prime rate | 6.75% |
| Last rate change | December 2025 (−0.25%) |
Source: Federal Reserve Bank of St. Louis (FRED), FEDFUNDS series.
2026 FOMC Meeting Decisions
The FOMC has met four times in 2026 and held rates steady at each meeting. The current pause follows three consecutive cuts in late 2025.
| Meeting | Decision | Target Range After |
|---|---|---|
| January 28–29, 2026 | Hold | 3.50%–3.75% |
| March 18–19, 2026 | Hold | 3.50%–3.75% |
| May 6–7, 2026 | Hold | 3.50%–3.75% |
| June 17–18, 2026 | Hold | 3.50%–3.75% |
| July 28–29, 2026 | Upcoming | TBD |
| September 16–17, 2026 | TBD | TBD |
| October 27–28, 2026 | TBD | TBD |
| December 9–10, 2026 | TBD | TBD |
Federal Funds Rate History (2021–2026)
The table below uses monthly effective rate data from the Federal Reserve Bank of St. Louis to show how the fed funds rate has moved through the recent tightening and easing cycles.
| Month | Effective Rate | Notes |
|---|---|---|
| Jan 2021 | 0.08% | Near-zero floor, pandemic era |
| Jan 2022 | 0.08% | Final month at near-zero |
| Mar 2022 | 0.20% | First hike — lift-off begins |
| Jun 2022 | 1.21% | Aggressive tightening underway |
| Sep 2022 | 2.56% | Four consecutive 75bp hikes |
| Dec 2022 | 4.10% | Rate up 4 points in one year |
| May 2023 | 5.06% | Approaching peak |
| Jul 2023 | 5.12% | Peak hiking cycle |
| Aug 2023 | 5.33% | Peak rate reached |
| Aug 2024 | 5.33% | Held at peak for 13 months |
| Sep 2024 | 5.13% | First cut — 50bp reduction |
| Oct 2024 | 4.83% | Second cut — 25bp |
| Nov 2024 | 4.64% | Third cut — 25bp |
| Dec 2024 | 4.48% | Target: 4.25%–4.50% |
| Aug 2025 | 4.33% | Held through summer 2025 |
| Sep 2025 | 4.22% | Fourth cut — 25bp |
| Oct 2025 | 4.09% | Fifth cut — 25bp |
| Nov 2025 | 3.88% | Sixth cut — 25bp |
| Dec 2025 | 3.72% | Target: 3.50%–3.75% |
| Jan 2026 | 3.64% | First 2026 hold |
| Mar 2026 | 3.64% | Second 2026 hold |
| May 2026 | 3.63% | Third 2026 hold |
| Jun 2026 | 3.63% | Fourth 2026 hold |
Source: FRED FEDFUNDS series, Federal Reserve Bank of St. Louis.
The most striking feature of recent history is the pace of the 2022 tightening cycle. The Fed moved from near-zero to above 4% in a single calendar year — the fastest rate increase since the early 1980s. The rate then held at its 5.33% peak for 13 straight months before the cutting cycle began in September 2024.
What the Federal Funds Rate Is
The federal funds rate is the interest rate at which banks lend their excess reserves to other banks overnight. By law, depository institutions must hold a minimum level of reserves — a percentage of their total deposits — in an account at a Federal Reserve bank. On any given day, some banks end up with more reserves than required, and others come up short. The overnight lending market between these banks is where the federal funds rate applies.
The FOMC does not directly set the rate — it sets a target range. The New York Fed then conducts open market operations (primarily buying and selling Treasury securities) to keep the actual overnight lending rate within that target range. The end result is the “effective federal funds rate” you see in the data, which typically sits near the middle of the target range.
The FOMC meets eight times per year to review economic conditions and vote on any changes to the target range. Decisions are driven by the Fed’s dual mandate: maximum employment and stable prices (defined as 2% inflation over time). When inflation runs too hot, the FOMC raises rates to cool borrowing and spending. When growth slows or unemployment rises, it cuts rates to stimulate activity.
How the Rate Affects Your Money
The federal funds rate sets the floor for borrowing costs throughout the economy. Its effects travel through several channels.
Savings accounts and CDs. Banks use the fed funds rate as a reference point for what they pay depositors. When rates rise, competitive online banks raise their high-yield savings account APYs quickly. When the Fed cuts, those rates follow. The national average savings rate at traditional banks tends to stay well below the fed funds rate regardless of direction — only high-yield accounts and CDs reliably track it.
Credit cards and personal loans. Variable-rate credit cards are typically priced at the prime rate plus a margin. The prime rate, currently 6.75%, moves the same day as any fed funds rate change. If the Fed cuts 25 basis points at a future meeting, the prime rate drops to 6.50% and variable card rates fall by the same amount.
HELOCs. Home equity lines of credit are almost always tied directly to the prime rate. With prime at 6.75%, most HELOCs are priced in the 7.5%–10% range depending on the lender’s margin and the borrower’s credit.
Mortgages. Fixed-rate mortgages are not directly linked to the federal funds rate — they follow the 10-year Treasury yield, which reflects long-term growth and inflation expectations. However, the overall direction of Fed policy does influence the broader rate environment that shapes mortgage pricing.
Stock market. Lower rates reduce borrowing costs for businesses and make future earnings worth more in today’s dollars, which tends to support higher equity valuations. Higher rates have the opposite effect. Markets typically react quickly to any FOMC decision or signal about future rate changes, which is why Fed communications are closely parsed by investors.
Auto loans. New and used vehicle loan rates generally track movements in the federal funds rate with a lag of weeks to months. A falling fed funds rate, over time, filters through to lower auto loan rates at dealerships and banks.
Historical Context
The federal funds rate has moved across an enormous range over its history. The FOMC pushed rates as high as 20% in 1981 to break the inflation of that era — a level that would be unimaginable today. After the 2008 financial crisis, rates were held near zero for seven years to support recovery. They were brought back to zero again at the start of the pandemic in March 2020, and then held there until the 2022 tightening cycle began.
The 2022–2023 hiking cycle — 525 basis points of increases in 16 months — was the most aggressive since the early 1980s. The easing cycle that followed (2024–2025) delivered six cuts totaling 175 basis points, bringing the rate from 5.33% to the current 3.50%–3.75% target range.
For context on how the current rate compares to savings and mortgage products, see the high-yield savings accounts guide and the mortgage rates guide.
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