In June 1981, the US federal funds rate averaged 19.1%. In April 2020, it averaged 0.05%. In September 2026, after the Federal Reserve's first rise in more than three years, it averaged 3.75%.
This is the rate the Fed targets when it raises or cuts interest rates. Here is what the fed funds rate is, how it is measured each day and what it feeds into.
What is the fed funds rate? The federal funds rate is the interest rate banks charge each other for overnight loans of reserves, with no collateral. The Fed sets a target range for it. The rate actually paid is published each day as the effective fed funds rate.
The target range is 3.75% to 4% after the September 2026 rise. The effective rate was 3.88% on 1 October 2026.
It is a median of real trades. These came to $104bn a day on average in 2026.
The monthly rate has ranged from 19.1% in June 1981 to 0.05% in April and May 2020.
The fed funds rate, the target and the effective rate
Three numbers share the name:
The target range is set by the Fed's rate-setting committee, the FOMC. It has been 3.75% to 4% since 17 September 2026. Before December 2008, the target was a single number.
The effective fed funds rate is the rate banks actually paid. The New York Fed publishes it each business day. It was 3.88% on 1 October 2026.
The monthly fed funds rate is the average of the daily effective rates. It was 3.75% in September 2026, because the month began at 3.63% and ended at 3.88%.
We explain how the Fed keeps the market rate inside its range in How the Fed Sets Rates.
72 years of the fed funds rate
Source: FRED (FEDFUNDS); YX Insights
The monthly series starts in July 1954, at 0.80%. Three periods stand out:
1979 to 1981. The Fed raised rates to fight double-digit inflation. The monthly rate peaked at 19.1% in June 1981. The daily rate hit 22.36% on 22 July 1981.
2009 to 2015 and 2020 to 2022. After the 2008 crisis and again in the 2020 pandemic, the rate sat near zero for years.
2022 to 2023. Eleven rises took the monthly rate from 0.08% in February 2022 to 5.33% in August 2023.
The effective rate was 3.63% just before the September 2026 rise. The rise lifted it to 3.88%.
How the effective fed funds rate is measured
Reserves are the money banks hold in their accounts at the Fed. Banks lend these to each other overnight in the federal funds market. Lenders also include some institutions that are not banks, mainly government-sponsored enterprises.
Each day, banks report these loans to the Fed. The New York Fed lines up every loan by its rate. It then finds the rate at which half the money lent was at a lower rate and half at a higher one. This is a volume-weighted median. It is published at about 9am Eastern time the next business day.
The market is smaller than it sounds. On 1 October 2026, $120bn was lent. For comparison, about $3 trillion a day changes hands in the market for overnight loans backed by Treasury bonds, covered in SOFR vs LIBOR.
Where the rate sits inside the range
Small moves in rates are measured in basis points. One basis point is one hundredth of a percentage point, so the Fed's 0.25-point range is 25 basis points wide.
Source: FRED (EFFR, DFEDTARL); YX Insights
The chart shows how far the effective rate sat above the bottom of the range each day:
In 2024, it was 8 basis points above the bottom on every trading day.
Since 17 September 2026, it has been 13 basis points above, at 3.88%.
On 17 September 2019, it was 30 basis points above, outside the top of the range. A cash shortage in the repo market caused it. We cover that day in What Is the Repo Market?
What the fed funds rate feeds into
Many US borrowing costs move with the fed funds rate:
The prime rate. It sits 3 points above the top of the Fed's range. It rose from 6.75% to 7.00% on 17 September 2026. Many credit cards and business loans are priced from it.
Other overnight rates. SOFR, the rate on overnight loans backed by Treasuries, moves with it. Since April 2018, the two have differed by 0.002 points on average.
Treasury bills. The 3-month bill yielded 4.00% on 1 October 2026.
Longer yields. These depend on where markets expect the fed funds rate to go, as we show in What Are Fed Funds Futures?
Savings rates, money market funds and mortgage rates respond too. Rising rates also lower the price of existing bonds, as Bond Prices and Yields explains.
How to follow the fed funds rate
The New York Fed publishes the effective rate at about 9am each business day.
FRED, the St. Louis Fed's data site, has the daily series (EFFR) and the monthly series (FEDFUNDS).
The FOMC statement after each of the eight yearly meetings gives the new target range. Our guide to What Does the Fed Do? covers how those decisions are made.
The fed funds rate is the price of overnight money between banks. The Fed sets the range. The market sets the exact rate, almost always inside it.
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