Data through: October 2026 · updated Nov 3 · Updates: Monthly · Next: Dec 1
MThe three bars show the last 3 months for this indicator, oldest left to newest right. Bar height reflects each reading relative to the other two — the tallest is the highest of the three, the shortest the lowest.
↓ 0.2 pp YoY
Historical context: Currently in the 45th percentile of all historical readings.
What this means right now: The Fed Funds Rate is near neutral — between 2.5% and 4% — neither stimulative nor restrictive. The economy can grow at trend without a monetary headwind or tailwind. In the 146 such months since 1954 the S&P 500 was higher a year later about 3 times in 4 (101 of 134), the same as after any month.
Federal Funds Rate · Monthly · 1954–2026
NBER recessions
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Monthly values
Federal Funds Rate — the last 12 months
Every month's reading, with the band the heatmap gives it. The chart above shows the same series in full.
Month
Value
Band
Oct 2026
3.88%
Within normal range
Sep 2026
3.75%
Within normal range
Aug 2026
3.63%
Within normal range
Jul 2026
3.63%
Within normal range
Jun 2026
3.63%
Within normal range
May 2026
3.63%
Within normal range
Month-end readings of the same series as the chart. Values are the current record, not point-in-time: a month that has since been revised shows its revised value.
What is the Fed Funds Rate?
The Federal Funds Rate is the interest rate at which banks lend money to each other overnight — set by the Federal Reserve as its primary monetary policy tool. Most other US interest rates key off it: mortgages, car loans, credit cards, Treasury yields and corporate bonds. So it sets the cost of borrowing for households and businesses across the economy.
When the Fed raises rates (tightening), borrowing becomes more expensive, which slows economic activity and reduces inflation. When it cuts rates (easing), borrowing becomes cheaper, stimulating spending and investment. For stocks, higher rates reduce the present value of future earnings, which weighs on valuations, especially for high-growth companies. Lower rates do the opposite. The bands below show what followed each level on the site's data since 1954.
How We Color-Code the Fed Funds Rate
Our heatmap colors this indicator against historically significant thresholds:
1.00% or below
Very low rates — at or below 1%, about 1 month in 6 since 1954 (143 of 868), almost all of them 2008–17 and 2020–22
1.00% – 2.50%
Low rates — 1% to 2.5%, below most estimates of neutral; about 1 month in 7 since 1954 (121 of 868)
2.50% – 4.00%
Near neutral — 2.5% to 4%, neither stimulative nor restrictive; about 1 month in 6 since 1954 (146 of 868)
4.00% – 5.50%
Restrictive — 4% to 5.5%, about 1 month in 5 since 1954 (183 of 868)
Above 5.50%
Very restrictive — above 5.5%, about 1 month in 3 since 1954 (275 of 868), the last of them January 2001
Historical Extremes — What Happened Next?
When this indicator reaches extreme levels, history shows consistent patterns:
2022-2023Fastest Hiking Cycle in 40 Years
Rate: 5.25% – 5.50%
The Fed took the rate from near zero to 5.5% in 16 months, the fastest rise since 1981. The S&P 500 fell 25% from its January 2022 high to its October low, then recovered.
2020-2021Zero Rate Policy
Rate: 0% – 0.25%
Near-zero rates for two years went with one of the strongest bull markets on record. The S&P 500 more than doubled from its March 2020 low to January 2022 (+114%).
2006-2007Pre-Crisis Peak
Rate: 5.25%
The Fed held the rate at 5.25% from July 2006 to July 2007 while housing turned down. It then cut from September 2007, to 2% by May 2008 and 0.16% by December 2008.
Frequently Asked Questions
How does the Federal Funds Rate affect stock prices?
Higher rates reduce stock prices through two channels. First, they raise the discount rate used to value future earnings, making future profits worth less today. Second, they make bonds more attractive relative to stocks, pulling money from equities into fixed income. The impact is strongest on high-growth, long-duration stocks whose value depends most on distant future earnings.
What is the "neutral" Federal Funds Rate?
The neutral rate is the theoretical rate that neither stimulates nor restricts the economy — often called r* (r-star). Estimates have clustered around 2.5–3% in recent years. Rates below neutral are stimulative; above neutral, restrictive. The neutral rate itself changes over time with the structure of the economy.
How quickly do rate changes affect the economy?
Rate changes affect financial markets immediately but affect the real economy with a lag of 12-18 months. This lag is why the Fed must act preemptively — when they raise rates to fight inflation, the full impact on the economy won't be felt for over a year. This delay makes monetary policy challenging and increases the risk of overtightening.
What is the difference between the Federal Funds Rate and mortgage rates?
The Fed Funds Rate directly controls overnight bank lending rates. Mortgage rates (typically 30-year fixed) are influenced more by 10-year Treasury yields, which move based on long-term inflation expectations and economic outlook — not just the Fed Funds Rate. This is why mortgage rates sometimes rise even after the Fed cuts rates, or fall before the Fed acts.
When does the Fed cut rates, and what has followed?
The Fed cuts when growth is slowing or unemployment is rising. From 1957 to September 2026 there have been 15 first cuts, counting a cut as the monthly average falling a quarter point below its high of the previous six months after at least six months without one. Stocks did no better than usual afterwards: the S&P 500 was higher a year after the cut in 10 of the 15, about the same share as after any month (633 of 856). Whether a cut was "insurance" or "panic" is known only afterwards. In the 7 cases with no recession in the following year the index was higher in 6; in the 8 where a recession was under way or began within the year, in 4.