Seventy years of the fed funds rate, against the inflation it was chasing
The federal funds rate is the base cost of money in the US economy, and almost every other rate is built on top of it. On its own the line is hard to read: a rate of 10 percent means something very different depending on what prices were doing at the time. So this plots the policy rate against inflation, 1955 to 2025. The gap between the two lines is the story.
Policy rate and inflation, 1955 to 2025
The teal line is the effective federal funds rate. The gray line is year-over-year CPI inflation. When the teal line sits well above the gray one, policy is tight; when it sits below, money is cheap in real terms even if the headline number looks high.
View as a table
| Year | Fed funds rate | CPI inflation |
|---|---|---|
| 2025 | 4.21% | 2.63% |
| 2024 | 5.14% | 2.95% |
| 2023 | 5.02% | 4.12% |
| 2022 | 1.68% | 8.00% |
| 2021 | 0.08% | 4.70% |
| 2020 | 0.38% | 1.23% |
| 2019 | 2.16% | 1.81% |
| 2018 | 1.83% | 2.44% |
| 2017 | 1.00% | 2.13% |
| 2016 | 0.40% | 1.26% |
| 2015 | 0.13% | 0.12% |
| 2014 | 0.09% | 1.62% |
| 2013 | 0.11% | 1.46% |
| 2012 | 0.14% | 2.07% |
| 2011 | 0.10% | 3.16% |
| 2010 | 0.18% | 1.64% |
| 2009 | 0.16% | -0.36% |
| 2008 | 1.93% | 3.84% |
| 2007 | 5.02% | 2.85% |
| 2006 | 4.96% | 3.23% |
| 2005 | 3.21% | 3.39% |
| 2004 | 1.35% | 2.68% |
| 2003 | 1.13% | 2.27% |
| 2002 | 1.67% | 1.59% |
| 2001 | 3.89% | 2.83% |
| 2000 | 6.24% | 3.38% |
| 1999 | 4.97% | 2.19% |
| 1998 | 5.35% | 1.55% |
| 1997 | 5.46% | 2.34% |
| 1996 | 5.30% | 2.93% |
| 1995 | 5.84% | 2.81% |
| 1994 | 4.20% | 2.61% |
| 1993 | 3.02% | 2.95% |
| 1992 | 3.52% | 3.03% |
| 1991 | 5.69% | 4.24% |
| 1990 | 8.10% | 5.40% |
| 1989 | 9.22% | 4.83% |
| 1988 | 7.57% | 4.08% |
| 1987 | 6.66% | 3.66% |
| 1986 | 6.81% | 1.90% |
| 1985 | 8.10% | 3.55% |
| 1984 | 10.23% | 4.30% |
| 1983 | 9.09% | 3.21% |
| 1982 | 12.26% | 6.13% |
| 1981 | 16.38% | 10.34% |
| 1980 | 13.36% | 13.55% |
| 1979 | 11.19% | 11.26% |
| 1978 | 7.93% | 7.63% |
| 1977 | 5.54% | 6.50% |
| 1976 | 5.05% | 5.74% |
| 1975 | 5.82% | 9.14% |
| 1974 | 10.50% | 11.05% |
| 1973 | 8.73% | 6.18% |
| 1972 | 4.43% | 3.27% |
| 1971 | 4.66% | 4.29% |
| 1970 | 7.18% | 5.84% |
| 1969 | 8.20% | 5.46% |
| 1968 | 5.66% | 4.27% |
| 1967 | 4.22% | 2.77% |
| 1966 | 5.11% | 3.02% |
| 1965 | 4.08% | 1.58% |
| 1964 | 3.50% | 1.28% |
| 1963 | 3.18% | 1.24% |
| 1962 | 2.71% | 1.20% |
| 1961 | 1.96% | 1.07% |
| 1960 | 3.22% | 1.46% |
| 1959 | 3.31% | 1.01% |
| 1958 | 1.57% | 2.73% |
| 1957 | 3.11% | 3.34% |
| 1956 | 2.73% | 1.52% |
| 1955 | 1.79% | -0.28% |
Three regimes in one chart
- The great inflation, and the price of ending it. Inflation peaked at 13.55% in 1980, and the policy response drove the funds rate to 16.38% in 1981. Double-digit annual averages appear in 6 years, all clustered in that period. Mortgages of the era carried rates no borrower today would recognise.
- The long moderation. From the mid-1980s to 2007 the rate cycled roughly between 3 and 9 percent while inflation stayed low and stable. This is the period most people picture when they say rates are "normal", and it is a narrower band than the seventy-year record supports.
- The zero era, which has no precedent here. 10 years average below 0.50 percent, and every one of them is after 2008. A whole generation of borrowers and savers formed their expectations inside a regime that had never occurred before in this series.
- Speed matters more than level. The 2021 to 2023 move was about 4.94 percentage points in two years. The level reached was ordinary by historical standards; the pace was not, and repricing that fast is what breaks things.
Method
- Rate. Annual averages of the effective federal funds rate, FEDFUNDS, 1955 to 2025. The effective rate is what banks actually traded at, not the target; since December 2008 the target is a range.
- Inflation. Year-over-year change in the annual CPI-U index, computed from the stored series. Only years where both the year and its predecessor exist in the index are plotted; nothing is interpolated to fill a gap.
- Annual averages smooth the path. A year that began and ended at very different rates is shown as one number, so a fast mid-year move looks gentler here than it felt. Monthly data shows the sharper edges.
- The rate is set by policy, not a formula. It changes when the Federal Open Market Committee decides, so past behaviour does not predict the next move.
Sources and reuse
- Policy rate: Board of Governors of the Federal Reserve System, Effective Federal Funds Rate (FEDFUNDS), annual averages, as at 2026-08-09.
- Inflation: US Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers (CPI-U), all items, not seasonally adjusted (CPIAUCNS), as at 2026-08-09.
- How the rate is set: Federal Reserve, open market operations.
- Year-by-year table: federal funds rate history.
The underlying figures are US government and Federal Reserve data. Our compilation and analysis may be quoted freely with credit to CalculatorHub and a link to this page. Reviewed by the CalculatorHub team, edited by James Graham, 9 August 2026. See our methodology. General information, not financial advice.
Frequently asked questions
What is the highest the fed funds rate has ever been?
16.38%, the annual average for 1981, during the Volcker campaign to break double-digit inflation. The rate averaged double digits in 6 separate years (1974, 1979, 1980, 1981, 1982, 1984). Nothing since has come close: the highest annual average of the past four decades is far below that peak.
Why did rates sit near zero for so long?
After the 2008 financial crisis and again in the pandemic, the Federal Reserve cut its policy rate to almost nothing to support demand. 10 of the 71 years in this series average below 0.50 percent, and every one of them falls after 2008. That is an experiment with no precedent in the earlier record, which is why comparisons to "normal" rates depend heavily on which decade you call normal.
How fast did rates rise in 2022 and 2023?
The annual average went from 0.08% in 2021 to 5.02% in 2023, a jump of about 4.94 percentage points in two years. Because so much borrowing is priced off this single rate, that pace is what strained regional banks and cooled the housing market, more than the level itself.
Does the fed funds rate set my mortgage rate?
Not directly. The federal funds rate is an overnight rate between banks. It feeds quickly into short-term borrowing (credit cards, home-equity lines, savings yields) through the prime rate, but 30-year mortgage rates track longer-term bond yields and expectations about future inflation, so they can move differently and sometimes in the opposite direction.
Is the rate a single number?
Since December 2008 the Fed has set a target range rather than a single point. The figures here are the effective rate, the volume-weighted average at which banks actually traded overnight, which normally sits inside that range. Annual figures are averages of the monthly effective rate.