FEDERAL RESERVE BANK & MONETARY POLICY

FEDERAL FUNDS RATE

key sources of information on FED & MONETARY POLICY

The following are links to information on the Federal Reserve's roles and activities relating to monetary policy:

PRIMARY MONETARY POLICY TOOLS OF THE FEDERAL RESERVE

Federal Funds Rate Actions
Fed raises or lowers the Fed Funds rate to tighten or loosen monetary policy.

Large Scale Asset Purchases (LSAPs) (see Fed & Monetary Policy: Balance Sheet):

Taking actions that affect the size and composition of the Fed’s balance sheet through purchases or sales of longer-term securities in the open market. These Federal Reserve actions either reduce or increase the quantity of such assets available for purchase. The increased scarcity or greater supply tends to raise or lower the price of these securities and depress or increase their yields. Balance sheet policies can reinforce the credibility of the forward guidance if these policies are seen as a signal that the Fed intends to sustain such policies.

Forward Guidance:
Fed credibly conveys publicly that they will likely pursue a path for the Fed funds rate that is either lower than previously anticipated to put downward pressure on longer-term interest rates or higher than previously anticipated to put upward pressure on longer-term interest rates.

FEDERAL RESERVE FOMC SEMI-ANNUAL ECONOMIC PROJECTIONS

 

Summary of Federal Reserve FOMC Semi-annual Economic Projections and Change from Prior Projection.

 

GDP Growth: The Fed projects slow, steady economic growth.

Unemployment Rate Projection: Fed is projecting an increase, followed by a relatively stable unemployment rate.

Federal Funds Rate Projection: Fed is projecting that, following the Fed Funds rate hike pause into early 2024, rate hikes will fall significantly in late 2024 and beyond.

Core PCE Inflation Rate Projection: Fed is projecting that the inflation rate will decline over the next several years.

FEDERAL FUNDS RATE ACTIONS

 
 

Actions During Great Recession

  • Fed funds rate since the peak of 5.25% during 2006 & 2007.

  • September of 2007, fed funds rate by 25 bps; commenced a program to drive this interest rate toward zero.

  • Ten actions from September 2007 to December 2008 to lower the fed funds effective rate to 0.25%.

  • Fed funds rate was held at 0.25% for 84 months through December 2015.

Actions During "Normalization" Program

  • In December 2015, the Fed “normalization” program commences.

  • Since December 2015, fed funds rate increased on nine more occasions to an effective rate of 2.50%.

  • Fed funds rate unchanged at March & June 2019 FOMC meetings.

  • Fed funds rate lowered by 25 bps at its July, September and October 2019 meetings.

  • No fed funds change at December 2019 and January 2020 meetings.

Actions During "COVID-19 Global Pandemic and Following Surge in Inflation

COVID Support

Inflation Containment

  • In early March, the Fed took emergency action - ahead of the March 17-18 FOMC meeting - and lowered the Fed Funds rate by 50 bps on March 3rd and another 100 bps on March 15 in an attempt to counteract the economic impact of the Global COVID-19 Pandemic.

  • With Fed funds rate near 0%, the Fed has made no rate changes at the FOMC meetings since March 2020 and into 2021.

  • During 2022, the Fed instituted seven rate hikes totaling 425 bps.

  • During 2023, the Fed raised rates four of the five times that they met, totaling 100 bps.

  • The last meeting of the FOMC was held on September 17-18, 2024. The Fed Funds rate reduced by 50 bps.

  • The next meeting of the FOMC will be held in November 6-7, 2024. 25 bps reduction to Fed Funds is anticipated.

 
 

PHASES IN FED MONETARY POLICY: FEDERAL FUNDS RATE

2020-2024 Fed Funds Actions:  The Federal Reserve has or is expected to make a decision on the federal funds rate during the following meetings:

Global COVID-19 pandemic response by Fed:

  • March 3, 2020 (50) bps

  • March 15, 2020 (100) bps

  • April 2020 - February 2022 0 bps

Surge in Inflation response by Fed:

  • March to December 2022 425 bps

  • January to July 2023 100 bps

Normalization from Inflation response by Fed:

  • August to December 2023 0 bps

  • January to August 2024 0 bps

  • September 2024 (50) bps

2024 FOMC Meeting Dates and Fed Funds Actions:

  • January 30-31 0 bps

  • March 19-20 0 bps

  • April 30 - May 1 0 bps

  • June 11-12 0 bps

  • July 30-31 0 bps

  • September 17-18 (50) bps

  • November 6-7 ? bps

  • December 17-18 ? bps