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Fed Rate History Chart: A Guide to Central Bank Policy

The Federal Reserve's (Fed) target federal funds rate has been a key driver of the US economy for decades. By raising or lowering the target rate, the Fed can influence the cost of borrowing and spending, thereby affecting economic growth, inflation, and unemployment.

Historical Perspective

The Fed began targeting the federal funds rate in 1982. Since then, the rate has fluctuated significantly, reflecting the changing economic conditions and the Fed's policy objectives.

The following chart shows the monthly federal funds target rate from 1982 to the present:

fed rate history chart

Fed Rate History Chart
https://www.federalreserve.gov/monetarypolicy/fomcrate.htm

Current Policy

The current target range for the federal funds rate is 4.25% to 4.50%. This marks a significant increase from the near-zero levels seen during the COVID-19 pandemic.

Fed Rate History Chart: A Guide to Central Bank Policy

The Fed has raised rates aggressively in 2022 to combat rising inflation. The inflation rate, as measured by the Consumer Price Index (CPI), reached a 40-year high of 9.1% in June 2022.

Economic Impact

The Fed's interest rate policy has a wide range of economic impacts. Here are some of the key effects:

Economic growth: Raising interest rates tends to slow economic growth by making borrowing more expensive.
Inflation: Raising interest rates can help to reduce inflation by making it more expensive for businesses to raise prices and consumers to make purchases.
Unemployment: Raising interest rates can lead to higher unemployment by making it more expensive for businesses to hire new workers.
Financial markets: Raising interest rates can lead to lower stock prices and higher bond yields.

Future Outlook

The Fed has indicated that it expects to continue raising interest rates in 2023. The pace of rate hikes will depend on the economic data and the Fed's assessment of the risks to inflation.

Historical Perspective

Economists expect the Fed to raise rates to around 5% by the end of 2023. This would be the highest level since 2007.

Implications for Consumers and Businesses

The Fed's interest rate policy can have a significant impact on consumers and businesses.

Economic growth:

Consumers: Higher interest rates make it more expensive to borrow money for mortgages, auto loans, and other types of debt. This can reduce consumer spending and weigh on economic growth.
Businesses: Higher interest rates make it more expensive for businesses to borrow money for capital investments and operating expenses. This can reduce business investment and hiring, which can also weigh on economic growth.

Tables

The following tables provide additional information on the Fed's interest rate history and policy:

Table 1: Fed Rate Hikes Since 2022

Date	Target Rate	Change
March 16, 2022	0.25%	25 basis points
May 4, 2022	0.50%	50 basis points
June 15, 2022	0.75%	75 basis points
July 27, 2022	0.75%	75 basis points
September 21, 2022	0.50%	50 basis points
November 1, 2022	0.25%	25 basis points
January 25, 2023	0.25%	25 basis points

Table 2: Fed Rate Cuts Since 2020

Date	Target Rate	Change
March 3, 2020	1.00%	50 basis points
March 14, 2020	0.50%	50 basis points
March 16, 2020	0.00%	50 basis points

Table 3: Fed Rate History by Decade

Decade	Average Rate
1980s	10.8%
1990s	6.0%
2000s	4.3%
2010s	1.7%
2020s	4.3% (through January 2023)

Table 4: Impact of Fed Rate Hikes on Economic Growth

Fed Rate Hikes	GDP Growth	Unemployment Rate
1994-1995	2.7%	5.6%
1999-2000	3.7%	4.0%
2004-2006	3.2%	4.7%
2015-2016	2.3%	4.9%
2017-2018	2.9%	3.9%

Conclusion

The Fed's interest rate policy is a powerful tool that can be used to influence the economy. The Fed has raised rates aggressively in 2022 to combat rising inflation, and economists expect rates to continue to rise in 2023. The impact of this policy on consumers, businesses, and the economy as a whole remains to be seen.