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Historical Fed Funds Rate

By Kimberly Amadeo, About.com

What Was the Historical Fed Funds Rate?:

A complete history of the Fed Funds Rate, from 1971 to the present, can be found at Federal Reserve Bank of New York. This shows both the change in the Fed Funds Rate and in the Discount Rate.

What Was the Highest Fed Funds Rate?:

The Fed Funds Rate reached a high of 20 points in 1979 and 1980. This was to combat double-digit inflation.

In 1973, inflation tripled from 3.9% to 9.6%. The Fed only doubled interest rates from 5.75 to a high of 11 points. However, inflation continued to remain in the double-digits through all of 1974, lasting until April 1975. The Fed continued raising the Fed Funds rate to 13 in July 1974, and then dramatically lowered the rate, reaching 7 1/2 by January 1975.

These sudden changes, known as stop-go monetary policy, confused price-setters, many of whom kept prices high, thus keeping inflation resistant.

This experience taught Fed Fund chairmen that managing inflation expections were a critical factor in managing inflation itself.

What Was the Lowest Fed Funds Rate?:

The Fed Funds rate is currently at its all-time low, between aero and .25%. The Fed lowered it to this level on December 17, 2008, the 10th rate cut in a little over a year.

Prior to this, the lowest Fed Funds Rate was 1 point in 2003, to combat the 2001 recession. At the time, there were fears that the economy was drifting towards deflation.

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