You may not think much about the federal funds rate on a daily basis, but this key number impacts many areas of your financial life and the economy as a whole.

The Federal Reserve — the country’s central bank — periodically adjusts its target rate to keep the economy running smoothly and consumer prices in check. When the federal funds rate moves up or down, so do the interest rates on bank accounts and loans. In other words, changes in the Fed’s rate impact how much your savings can grow and how much you pay to borrow money.

So how does today’s federal funds rate compare to past years? Here’s a look at historical Fed interest rates so you can better understand how your bottom line is affected.

The federal funds rate is set by the Federal Reserve and dictates what a bank can charge another bank for ultra-short-term loans (usually overnight) in order to meet reserve requirements. It's expressed as a range, and financial institutions can negotiate a specific rate between each other within that range.

The Fed’s target rate also impacts the interest rates individual financial institutions set for financial products such as deposit accounts, bonds, loans, and credit cards.

Read more: Fed rate cut: How it affects your bank accounts, loans, credit cards, and investments

The federal funds rate soared in the early 1980s when inflation hit more than 13%, the highest level recorded. This marked the end of a macroeconomic period known as the “Great Inflation,” which economists believe was brought on by Federal Reserve policies that led to an overgrowth in the supply of money.

In response, the Fed raised interest rates, and the federal funds rate reached more than 19%.

In the late 1990s and into the early 2000s, there was another major economic shift when the Fed began bringing the federal funds rate down. This move was fueled by the dot-com bubble burst — a period of economic instability when investors poured capital into internet-based companies, which led to an overvaluation of many of these start-ups. Unfortunately, not all of these companies were profitable, and the fallout of this bubble burst led to many bankruptcies and a recession.

Then, following the terrorist attacks of Sept. 11, 2001, the Fed cut rates further due to widespread uncertainty and a slowdown in economic activity.

In 2007, the housing market crash prompted the Fed to once again lower its target rate to 2%. A series of rate cuts followed, eventually bringing the target range down to a range of 0%-0.25% — effectively zero — by December 2008.

As the economy recovered from the Great Recession, the Fed began slowly increasing rates again. But in 2020, the COVID-19 pandemic rocked the U.S. economy and brought about challenges such as supply-chain issues, reduced economic activity, and high unemployment. In March 2020, the Fed once again slashed rates to a range of 0%-0.25%.

Read more: How to recession-proof your savings

Beginning in 2022, the Fed pivoted sharply as inflation surged to a 40-year high. It raised the rate aggressively through 2022 and 2023, eventually peaking at 5.25%–5.5%, the highest level in over two decades. By late 2024, however, inflation had eased, and the Fed began gradually cutting rates again.

The target rate remained steady at 4.25%–4.5% until September 2025, when the Fed finally cut its rate again by 25 basis points. Now, it stands at a range of 4%- 4.25%.

“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment have risen,” the Fed said in a statement explaining the decision.

The next Fed meeting is slated for October 28-29, 2025 when the Federal Open Market Committee (FOMC) will decide whether or not to further adjust the federal funds rate.

The Federal Reserve's latest "dot plot," which outlines policymakers' interest rate projections, now signals two additional rate cuts in 2025. That would bring the benchmark rate down to a range of 3.5-3.75% by the end of the year.

Even so, it's impossible to predict exactly how and when the Fed will cut rates in the future.

Read more: Why you should open a CD account before the Fed's next meeting

This month, the Federal Open Market Committee (FOMC) — a division of the Federal Reserve responsible for setting monetary policy — will meet again to evaluate the health of the economy and make key decisions regarding the federal funds rate.

Following a series of interest rate hikes between March 2022 and July 2023, which were intended to help reverse rising inflation, the Fed held its benchmark rate steady for over a year. However, in September 2024, the Fed decided to lower the federal funds rate by a whopping 50 basis points. It cut its target rate by another 25 bps in November, and again in December.

However, in all of its 2025 meetings so far, the Fed has decided to keep the federal funds rate steady at a range of 4.25% to 4.50%.

These decisions impact not only how the economy functions as a whole but also everyday consumers, as they influence rates on savings accounts, credit cards, mortgages, and more.

Statements and forecasts released during FOMC meetings provide valuable information on the economic outlook. Knowing when the Fed meets to discuss monetary policy and make important decisions can help you get a snapshot of the economy’s overall health and adjust your own financial strategy accordingly.

Read more: Should you open a savings account or CD before the Fed's next meeting?

The FOMC holds eight regularly scheduled meetings per year. Its most recent meeting took place July 29-30, 2025. The next one is scheduled for mid-September.

Here's the Fed's full meeting schedule for 2025:

January 28-29

March 18-19*

May 6-7

June 17-18*

July 29-30

September 16-17*

October 28-29

December 9-10*

* Meeting associated with a Summary of Economic Projections.

At these meetings, policymakers assess the health of the economy by evaluating economic indicators such as the Consumer Price Index (CPI), gross domestic product (GDP), and the unemployment rate to shape monetary policy.

The minutes of regularly scheduled meetings are released three weeks after the date of the policy decision. The live press conferences held by Federal Reserve Chairman Jerome Powell are also livestreamed and recorded.

Once each meeting concludes, the FOMC releases its policy decisions at 2 p.m. Eastern time. Then the Fed Chairman holds a press conference at 2:30 p.m.

Read more: How the Federal Reserve rate decision affects mortgage rates

The next meeting is expected to provide Americans with an update on the federal funds rate. The Fed lowered its target rate in September, November, and December 2024, but did not make any new changes so far in 2025.

"In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent," the FOMC wrote in a recent statement. "In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities...The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective."

Experts believe that the Fed will reduce the federal funds rate again in 2025, with a strong chance of a rate cut in September. However, the number and size of these rate cuts remain to be seen.

Read more: How much control does the president have over the Fed and interest rates?

It’s not possible to predict with certainty what the Fed will decide regarding the federal funds rate. That said, many economists expect rate cuts this year.

The FOMC holds eight regularly scheduled meetings per year. But this doesn’t necessarily mean the committee will decide to change rates at every meeting. Members assess the economy's performance and the committee adjusts monetary policy accordingly.

The Fed’s current target range is 4.25%-4.50%.

A stagnant labor market is tough going for job seekers. Firms are slow to post positions and slow to fill them. As job searches drag on, more people file for unemployment assistance.

But on a macro level, an uptick in unemployment can have a silver lining: When inflation slows and jobless numbers increase, the Fed moves to lower interest rates. That injects more money into the economy and, in theory, prompts firms to hire more workers.

On the other hand, strong job growth and low unemployment have a downside: A robust job market can drive higher inflation, setting the Federal Reserve on a course to try to reduce it — which can mean a longer wait before interest rates come down.

If the latest job numbers have you wondering about the interplay between the labor market, inflation, and the Fed — you don’t need to dig out your old macroeconomics textbook to find out. We’ll explain how the job market and inflation are connected, and how the Federal Reserve uses interest rates to influence them both.

Latest news: US economy adds 22,000 jobs, unemployment rate hits 4.3% in August

A strong job market can drive inflation higher, but high inflation can also reverberate through the US labor market.

A tight labor market is typically defined by low unemployment rates, an increase in job openings, and faster-than-usual wage growth. Businesses need to hire more workers to keep pace with surging demand. As businesses are forced to compete for workers, they’re more likely to offer wage increases and higher pay. After all, if your boss refuses to increase your pay, you can easily take your services to a different employer.

Workers, in turn, have more money to spend, which pushes prices higher. Inflation, after all, is often described as too much money chasing too few goods.

Meanwhile, higher labor costs add to the cost of doing business, said Christopher Decker, Ph.D., a professor of economics at the University of Nebraska-Omaha. “Businesses either have to reduce production, [which] typically involves cutting costs elsewhere, increase prices, or both.”

But high inflation also influences the job market, often drawing more people into the workforce in the short run.

Learn more: When is the Fed's next meeting? 

“High inflation will usually lead to an increase in the number of workers to take advantage of the higher wages being paid,” said Thomas Stockwell, Ph.D., an assistant professor of economics at the University of Tampa who studies monetary policy. “However, as workers realize their purchasing power has been eroded by inflation, they will be less willing to work.”

Most consumers generally can’t absorb higher prices forever, though. So eventually, they’ll have to cut their spending in response to rising prices.

“Higher prices will eventually slow, or even reverse, demand growth,” Decker said. “With less demand, the need for more labor is reduced.”

That’s a big reason the Fed kept interest rates at a 23-year high until recently — to the frustration of many would-be homeowners and other borrowers.

“By reducing demand for goods, services, and business investments, there’s less pressure on both wages and prices, so inflation slows,” Decker said.

Fed policymakers have a dual mandate from Congress to promote stable prices and maximum employment.

When inflation is high, the Federal Reserve raises the federal funds rate with the goal of cooling off spending. The federal funds rate is the amount banks charge one another for overnight loans. When banks pay more to borrow money, they pass the cost on to consumers in the form of higher interest rates, making it more expensive to borrow money.

The idea is to tame price increases by getting consumers to scale back on spending. If fewer people are making big purchases, theoretically, prices will grow at a slower pace.

The Fed was laser-focused on inflation in the aftermath of COVID-19 lockdowns when soaring energy prices and supply chain disruptions led to the highest inflation levels in decades. That’s why the Fed raised interest rates 11 times between March 2022 and July 2023.

Learn more: The Fed rate cut: What it means for your bank accounts, loans, credit cards, and investments

But the Fed walks a delicate tightrope when it hikes interest rates. In response to a drop in consumer demand, businesses may reduce hiring, causing the unemployment rate to spike. If consumer spending is weak and the unemployment rate is high, the central bank will often cut interest rates in response.

For example, the Fed slashed interest rates to nearly zero in response to the financial crisis of 2007-09 and the COVID-19 pandemic.

The Federal Reserve’s target inflation rate is pretty clear-cut: Since 2012, it has aimed for a 2% inflation rate as measured by the price index for Personal Consumption Expenditures, or PCE. The PCE has been inching closer to that level. Though it remains above the Fed’s 2% target, it’s still well below its recent peak of over 7% in June 2022.

Watch and learn: How 2% became the Fed’s inflation target

The definition of maximum employment, on the other hand, is a lot murkier.

“There is not an explicit target for unemployment like there is for inflation,” said Stockwell. “But to keep inflation steady, it is important to keep the unemployment rate as close to the natural rate of unemployment as possible. This is the unemployment rate that would exist if there were no shortages or surpluses in the labor market.”

Maximum employment isn’t 0% unemployment, Stockwell said, because some unemployment is healthy. There will always be what economists call frictional unemployment, which is driven by people in transition, i.e., you quit your job to find new opportunities or you’re a recent college grad searching for employment.

Some structural unemployment, which is when workers lose jobs due to factors like technological developments, globalization, or widespread changes in consumer demand, will always exist as well.

“Full employment is when the only people unemployed are those who are frictionally or structurally unemployed,” Stockwell said.

But in the second half of 2025, it's clear the labor market is slowing. Weekly jobless claims hit 263,000 in early September, the highest level in nearly four years. Preliminary estimates from the Bureau of Labor Statistics show almost a million fewer jobs were added in the 12 months through March 2025. And the slowdown is still underway: Payrolls grew by just 22,000 in August, averaging a meager 29,000 over the past three months.

Back in 2022, when the Fed first started hiking interest rates, many economists believed a recession was coming. Thus far, though, it hasn't materialized. The US economy actually grew by 3.1% in 2023 and 2.8% in 2024.

So what gives?

Economists are quick to point out that even at recent peaks, interest rates weren’t that high by historical standards. The economy experienced about 15 years of unusually low interest rates before rates started rising, Stockwell said.

“We don't have high interest rates right now,” Stockwell said. “We have returned to more normal interest rates.”

It’s also important to note that not all industries experience a sizzling job market at the same time. For example, sectors like healthcare, education, and state and local government tend to be relatively inflation-proof and aren’t sensitive to interest rates. Meanwhile, Big Tech tends to be interest-rate sensitive and is more likely to lay off workers in a high-rate environment.

Higher interest rates don’t always slow consumer spending by as much as the Fed would like because they don’t affect everyone equally. If you’re looking to buy a home and lock in a low mortgage, you’re struggling with credit card debt, or you’re a business owner seeking financing to expand, high interest rates are painful. But someone who obtained a low-rate mortgage in 2020 or 2021 and doesn’t carry revolving debt may be largely unaffected by high interest rates, so they can afford to keep spending, even if prices continue going up.

As expected, the Fed cut rates by 25 basis points at its September meeting and projected two more rate cuts in 2025, which would bring the benchmark rate down to a range of 3.50% to 3.75% by year-end.

The central bank also updated its projections for economic growth, inflation, and unemployment. The Federal Reserve sees core inflation hitting 3.1% this year and the unemployment rate rising to 4.5%.

The Fed also upgraded its previous forecast for US economic growth, with GDP expected to grow at an annualized pace of 1.6% this year before reaching 1.8% growth in 2026 and 1.9% in 2027.

On December 18, the Federal Open Market Committee (FOMC) lowered its benchmark interest rate by 25 basis points or 0.25%, to a range of 4.25% to 4.50%. The move follows a 50-basis-point reduction in September and a 25-basis-point reduction in October.

The cut was expected by investors based on Fed cues earlier in the year. The committee adjusts interest rates in part to encourage a long-term inflation rate near 2%. After three years of inflation above 3%, the rate of price increases fell to 2.4% in September 2024 before rising to 2.7% in November.

The Fed also indicated there would likely be only two rate reductions next year rather than four as previously predicted. The more conservative approach is prompted by the recent uptick in inflation and uncertainty over the outcomes of President-elect Trump’s policies.

The big question investors are asking is how these lower rates could affect their portfolios and investment strategies. Let's provide answers with a closer look at how the stock market typically responds to falling interest rates.

Latest news: Cautious Fed holds rates steady with Trump unknowns looming over outlook

When the Fed cuts interest rates, banks lower the rates they charge on loans made to their customers. On existing variable-rate debt, the reductions are immediate. In this case, business and consumer borrowers quickly benefit from lower ongoing interest expenses. New fixed-rate loans also get cheaper, but existing fixed-rate borrowings are not affected. Fed rate cuts can, however, create opportunities to refinance fixed-rate loans at lower interest rates.

In short, rate cuts lower the cost of borrowing. Cheaper debt is usually good for business, but the reason for the rate reduction influences how corporate leaders and investors respond.

If the Fed lowers rates because inflation is slowing, the response should be positive. Businesses are likely to pursue growth more aggressively. Investors, expecting higher earnings ahead, may funnel more capital into the stock market. This can push stock prices higher.

Lower rates can negatively affect the stock market when they are prompted by an economic slowdown. When the economic outlook is uncertain, corporate leaders and investors can be more cautious about investing in growth.

According to Robert R. Johnson, CEO and chair of active index strategy developer Economic Index Associates, "historically speaking, equities perform substantially better when the Fed is lowering rates rather than when the Fed is raising rates."

Learn more: What is the Federal Reserve?

Investor expectations heavily influence stock prices. For this reason, the effects of a rate change usually begin well before the Fed acts.

When investors expect a rate reduction and the economic outlook is good, stock prices rise. Once the Fed implements the cut, the after-effects can be minimal. The exception is if the rate reduction is more or less aggressive than investors had expected. In that case, the market may shift again as investors adjust to new circumstances.

Learn more: Your step-by-step guide to investing

Johnson, who has extensively studied how the Fed's policies affect stock market returns, identifies the best-performing sectors when interest rates are falling as autos, apparel, and retail.

Johnson also sees opportunity in real estate investment trusts or REITs, particularly mortgage REITs. "With rates expected to continue to fall in 2024 and beyond, both equity REITs and mortgage REITs could be attractive investments," Johnson said.

Learn more: How to invest in real estate: 7 ways to get started

David Russell, global head of market strategy at trading platform Tradestation, expects lower rates to benefit cruise ship operators and airlines. "They're economically sensitive and have significant debt loads," Russell said. "Lower inflation will help their profitability, while lower rates could reduce their borrowing costs."

To summarize, lower interest rates are particularly good for real estate values and companies that rely heavily on debt or discretionary consumer spending.

Investors routinely adjust their holdings and trading behaviors according to their economic outlook. This is evident in the market movements that follow reports on inflation, jobs, and gross domestic product.

Learn more: Jobs, inflation, and the Fed: How they're all related

As an example, the S&P 500 experienced a single-day decline of 3% in early August 2024 after a disappointing July jobs report sparked recession worries.

Market shifts prompted by investor-sentiment trends can encourage many to wonder what moves they should be making ahead of Fed-rate actions. The right answer depends on the investor's timeline and strategy.

Learn more: When is the Fed’s next meeting?

Investors who need to maximize income or growth within a relatively short timeline may see the opportunity to adjust holdings according to the interest rate climate.

Commonly, this involves shifting exposure between stocks and bonds. Bonds are favored when interest rates are rising, while stocks become popular as interest rates fall.

On the other hand, long-term investors with high-quality, diversified portfolios may want to avoid big changes in response to rate adjustments. Overhauling a portfolio based on temporary conditions can easily undermine results over time.

Lane Martinsen, founder and CEO of Martinsen Wealth Management LLC, describes the dangers of making short-term decisions for long-term portfolios.

"Reacting to rate changes can lead to emotional decision-making, which can harm long-term performance," Martinsen said. "Frequent buying and selling to 'time' the market often results in higher costs, taxes, and missed growth opportunities."

Long-term investors might instead rely on changing economic conditions to prompt periodic reviews of their portfolio composition or asset allocation. If the allocation is performing and the risk profile is acceptable, few to no adjustments are needed.

Still, a proven allocation strategy may allow for small changes to improve performance as interest rates evolve. In this scenario, Johnson recommends adjusting sector exposure.

Specifically, when interest rates are expected to drop over time, investors could reduce financial and utilities holdings while increasing exposure to autos, apparel, and retail — sectors that have historically shown strength in falling rate environments.

Investors can implement sector-based adjustments without changing their relative exposures to broader asset classes, such as stocks, bonds, and alternative assets. Doing so should keep the portfolio's risk and appreciation potential fairly stable, which is critical for long-term growth.

With fewer rate reductions now expected in 2025, any boost to earnings or bond prices next year will be more muted. There are also other, potentially offsetting, factors in play. Two to note are high valuations in the S&P 500 and unknown outcomes from any policy changes made by the new president. Major portfolio or strategy changes at this point could be premature. This may be the time for investors to focus on the long-term rather than chase uncertain gains.

Maybe you only think about the Federal Reserve when interest rate decisions make headlines.

However, the Fed does much more than that.

The Federal Reserve acts as a bank to banks. It holds bank deposits, lends money to financial institutions, and facilitates the process for banks to borrow funds from each other.

The Federal Reserve also ensures the smooth operation of the banking system and guides the nation's economy by managing U.S. currency and by steering interest rates.

Learn more: How Fed rate moves affect your money

In this article:

What does the Federal Reserve do?

What is a central bank?

The Federal Reserve System

The FOMC and what it does

How Fed interest rate moves impact the U.S. economy

FAQs

The Federal Reserve System, or the Fed, has five main responsibilities:

Monitor and attempt to guide the economy. The Fed establishes an interest rate used by banks for ultra-short-term loans. Called the federal funds rate, it influences the rates that financial institutions charge to consumers. This "monetary policy" can slowly nudge consumer prices higher or lower. The Fed, for the first time in 2025, lowered interest rates at its Sept. 17 meeting.

Maintains a stable financial system. The Fed monitors the banking system, looking to minimize widespread risk.

Monitors the health of U.S. banks to manage the risk of individual financial institution failures.

Facilitates a national payment system. The Fed enables the transfer of massive sums of money between financial institutions as well as the government.

Serves to enhance consumer protection and community economic development by supervising and regulating the U.S. financial framework.

Learn more: How the Fed affects student loan interest rates

The Federal Reserve is often called the U.S. "central bank." In fact, most countries have central banks. In Canada, it's the Bank of Canada. In the United Kingdom, it's the Bank of England.

The purpose of all central banks is the same: to monitor and ensure the stability of financial systems — including the banks, currencies, and economies of different countries or regions.

Who owns the Federal Reserve? No one owns the Federal Reserve. The Fed was established by the Federal Reserve Act in 1913 to be the country's central bank. It is an independent government agency accountable to Congress and U.S. citizens.

Learn more: How much control does the president have over the Fed and interest rates?

Even though it is referred to as the central bank of the United States, the Federal Reserve System, or Fed, actually consists of 12 districts, each with its own reserve bank. Each Federal Reserve district has a nine-member board of directors. Six are elected by commercial private banks within each district, and three are voted on by the Fed's Board of Governors.

Each regional reserve bank helps facilitate funds transfers between banks and the other districts and researches economic conditions within its area, which helps to inform the Fed's monetary policy.

The 12 districts are Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco.

Learn more: When is the Fed's next meeting?

The Federal Open Market Committee, or FOMC, is the arm of the Fed most often in the news. As Chair of the Board of Governors, Jerome Powell is the most visible of the dozen members of the FOMC.

The FOMC meets at least eight times a year to set the nation's monetary policy, which includes:

Determining the federal funds rate, as mentioned above. That's the interest rate charged to banks for overnight loans.

Setting a discount rate, which is interest charged to financial institutions that borrow funds from the Fed.

Buying and selling securities held in its own portfolio.

Determining reserve funds requirements for banks, if any.

The Fed also uses other tools to meet its mandate to promote the nation's economic stability, which can be explored on the Fed's website.

When the Fed adjusts — or decides to keep the federal funds rate steady — the impact seeps throughout the domestic financial system, influencing, to some degree or another, short- and long-term interest rates, consumer prices, credit availability, and much more.

Dig deeper: How the Federal Reserve rate decision affects mortgage rates

The Board of Governors is the Fed's supervisory body. The seven members are nominated by the President of the United States and confirmed by the U.S. Senate. Each member holds a 14-year term. The Federal Reserve System is accountable to Congress.

Individuals can not have accounts with the Federal Reserve, but in a way, the money in the Fed is ours. That's because financial institutions and the government itself hold cash, checks, wire transfers, and electronic payments in the Fed and use those assets to transfer funds and backstop cash flow. Banks can also borrow money from the Fed.

The Federal Reserve System, including the 12 Reserve Banks, is self-funding. No taxes or federal funding is used to operate the Fed. All profits, after expenses, are transferred to the U.S. Treasury.

The Federal Reserve banks are nonprofit entities with board members appointed by private commercial banks within a Reserve Bank's geographic district. Commercial banks hold stock in Reserve Banks as a law-mandated prerequisite of membership. However, after dividend payments to stockholders, all net earnings are deposited in the U.S. Treasury.

The Federal Reserve's main responsibilities are guiding the American economy with monetary policies, minimizing risks to banks and consumers, and overseeing the transfer of funds between banks and the U.S. government.

This article was edited by Laura Grace Tarpley.

The Federal Open Market Committee (FOMC) is in the midst of its second meeting of 2025. Each time the committee meets, it could mean a change to the federal funds rate — which not only impacts financial institutions, but your bottom line, too.

In its January meeting, the Federal Reserve decided to hold rates steady after implementing three interest rate cuts in 2024. Now, Americans are waiting with anticipation to learn whether another rate reduction is on the agenda. Here’s what the experts think.

Read more: When is the Fed’s next meeting?

The federal funds rate is the interest rate at which depository institutions charge each other for ultra-short-term loans, usually overnight. It's expressed as a range, and financial institutions negotiate a specific rate within that range.

The federal funds rate plays a key role in the Federal Reserve’s management of inflation. When inflation is too high, the Fed typically raises its rate to reduce consumer spending and slow economic activity. Conversely, the Fed may lower its rate to stimulate economic activity and growth.

The federal funds rate doesn’t directly affect the rates offered by individual banks, but it does have an influence. When the Fed’s target rate increases or decreases, rates for high-yield savings accounts, certificates of deposit (CDs), money market accounts, credit cards, home loans, and other banking products generally follow suit.

That means when the Fed’s rate is high, it can be a good time to deposit money in a bank account and earn more interest. When it’s low, it’s a good time to borrow money or refinance at a lower interest rate.

Read more: How do banks set their savings account interest rates?

After inflation peaked in June 2022, the Fed implemented a series of rate hikes in an effort to tame it. Then the Fed held rates steady from August 2023 to September 2024. In September, the Fed decided to lower the federal funds rate by 50 basis points. It cut its target rate by another 25 bps in November, and again in December.

In its last meeting, the Fed held rates steady, noting that inflation still remains somewhat elevated. In a statement, the committee said: “In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.”

Here’s a closer look at how rates have changed over time alongside the federal funds rate:

Read more: A look at the federal funds rate over the past 50 years

The Fed’s job is to carefully monitor the economy and maintain stability. During each meeting, it may adjust its target rate and overall monetary policy based on what the economy needs to continue running smoothly. However, it doesn’t necessarily announce its plans ahead of time.

Economic experts monitor the economy's health closely and formulate their own ideas about the Fed’s next move based on the data they have available.

“The statement and press conference will be highly scrutinized as market participants look for any evidence of hawkish or dovish sentiment,” said Luke Tilley, chief economist at Wilmington Trust. “Wilmington Trust thinks the Fed is looking to maintain their current stance due to the uncertainty around the impact of tariffs and other policies. Any forecasted effects are only penciled in at present.”

Tilley noted that while policy uncertainty may raise caution within the Fed, rate decisions are typically based on hard data. “The firm expects the Fed to hold rates steady, and for Chair Powell to emphasize uncertainty,” he said.

Regardless of whether the federal funds rate changes, it’s a good time to evaluate your banking products and potentially make some savvy money moves that could pay off later.

Right now, the national average savings interest rate is well below 1%. But many banks and credit unions offer high-yield savings accounts with APYs as high as 4% or more — at least, for now. If your interest rate isn’t competitive, you could be leaving money on the table.

Take stock of your current deposit accounts, shop around, and see if you’re getting the best rates possible. If you’re not, it could be time to switch banks or open up a new type of account.

One of the major perks of a CD is that it offers a fixed interest rate for the entire term. This allows you to lock in a high APY ahead of any potential rate cuts.

Keep in mind that if you make a withdrawal before your CD reaches maturity, you’ll be subject to an early withdrawal penalty. So be sure to carefully consider your savings goals before tying up your money in a CD. If you’re saving for a longer-term goal (six months to two years), opening a CD and securing a higher rate could help you reach it even faster.

If you’re preparing for a big-ticket purchase (like a car or house), applying for a new loan now could potentially lock you into a higher interest rate.

It’s impossible to predict with certainty how the Fed will change rates — if at all. However, if Fed officials do decide to cut rates in the near future, lenders will likely reduce mortgage rates as well. So it could pay to hold off.