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, September 17-18 and October 29-30 meetings.

The next meeting of the FOMC will be held on December 10-11.

 

Federal Reserve Perspective on Monetary Policy:

FOMC Statement (10/30/2019): “Information received since the Federal Open Market Committee met in September 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 remain weak. 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 1-1/2 to 1-3/4 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. The Committee will continue to monitor the implications of incoming information for the economic outlook as it assesses the appropriate path of the target range for the federal funds rate.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.”

FOMC Federal Funds Projections: The mid-point of the Fed Funds projections for 2019, 2020 and 2021 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, September and October meetings, the Fed took precautionary steps and lowered the fed funds rate by 25 bps each time. For now, it appears that the Fed is contemplating no further actions.

 

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

  • October 2019 (25) bps

  • December 2019 XX bps