Federal Funds Rate: What It Is and Its Impact on You
The federal funds rate is an interest rate set by the Federal Reserve for banks to lend money to each other overnight. On September 16, 2026, the FOMC raised this rate by a quarter point, bringing it to between 3.75% and 4.00%. Wall Street traders anticipate at least one more increase before year-end. Over recent years, the federal funds rate has fluctuated significantly—from near zero in early 2022 through multiple hikes peaking at 5.25% by July 2023—before a series of cuts brought it down to around 4.25%. The Fed adjusts this rate based on economic conditions and inflation trends, aiming to either stimulate or slow the economy. The Federal Open Market Committee (FOMC) meets eight times annually to decide whether to raise, lower, or maintain the federal funds rate within a target range. These decisions influence broader financial markets and consumer borrowing costs.