Key points
- Primary tool for US monetary policy.
- Influences borrowing costs across mortgages, credit cards, and business loans.
- Markets price expectations via Fed Funds futures and OIS curves.
Example
When the Fed funds rate is 5.25%, your savings account might earn 4.5%, while a 30-year mortgage could cost 7.5%.
In history
The Fed raised rates from 0% (March 2022) to 5.5% (July 2023) in just 16 months—the fastest pace since Volcker in the 1980s.
Related terms