FEDERAL RESERVE BANK & MONETARY POLICY

FEDERAL FUNDS RATE

 

key sources of information on FRB & MONETARY POLICY

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

 

FEDERAL FUNDS RATE ACTIONS

Federal Reserve Bank Fed Funds Actions:  The Fed has taken many actions on the fed funds rate since the peak of 5.25% during 2006 & 2007.

In September of 2007, the Fed lowered the fed funds rate by 25 bps and commenced a program to drive this interest rate toward zero. The Fed took ten actions from September 2007 to December 2008 to lower the fed funds effective rate to 0.25%.

The fed funds rate was held at 0.25% for 84 months to December 2015.

In December 2015, the Fed commenced its program to raise the fed funds rate to a more normalized level in a steady, disciplined manner.

Since December 2015, the Fed has increased the fed funds rate on nine more occasions to an effective rate of 2.50% currently, including the December hike of another 25 bps.

The Federal Reserve held fed funds rate unchanged at its March and June 2019 FOMC meetings.

The Fed lowered the fed funds rate by 25 bps at its July 30-31 meeting and at its September 17-18 meetings.

The next meeting of the FOMC is October 29-30. The December meetings will be held on December 10-11 and where an interest rate decision is typically made.

 

Federal Reserve Perspective on Monetary Policy:

FOMC Statement (9/18/2019): “Information received since the Federal Open Market Committee met in July indicates that the labor market remains strong and that economic activity has been rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although household spending has been rising at a strong pace, business fixed investment and exports have weakened. On a 12-month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the Committee decided to lower the target range for the federal funds rate to 1-3/4 to 2 percent. This action supports the Committee's view that sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective are the most likely outcomes, but uncertainties about this outlook remain.

FOMC Federal Funds Projections: The mid-point of the Fed Funds projections for 2019 and 2020 is now at the Fed Funds rate following the rate cut. There remained a group that suggested another 25 bps reduction would be appropriate.

Since the September 2018 FOMC meeting, the Fed has altered its view on the economy and on the pace of fed funds rate hikes: from three (3) hikes to two (2) hikes to zero (0) hikes for 2019. And, as of the June meeting, the uncertainty in the global and domestic economies are creating potential for a rate hike in 2019. At the July and September meetings, the Fed took precautionary steps and lowered the fed funds rate by 25 bps twice.

 

2018 Fed Funds Actions:  The Federal Reserve has raised the federal funds rate:

  • March 2018 25 bps

  • June 2018 25 bps

  • September 2018 25 bps

  • December 2018 25 bps

2019 Fed Funds Actions:  The Federal Reserve is expected to make a decision on the federal funds rate during the following meetings:

  • March 2019 0 bps

  • June 2019 0 bps

  • July 2019 (25) bps

  • September 2019 (25) bps

  • December 2019 XX bps