Federal Funds Rate, explained

FRED series

FEDFUNDS

effective rate, not the target

Frequency

Monthly

not smoothed for seasonal patterns

Default view

Level

in percent, log scale by default

Zones

4

0–2 / 2–4.25 / 4.25–5.25 / 5.25+ %

The interest rate at which US banks lend their reserve balances to each other overnight. The Federal Reserve doesn't set this rate directly — it sets a target range and then uses its policy tools to keep the actual market rate trading inside that range.

It matters far beyond interbank lending because it is the base rate the rest of the US financial system prices off: mortgages, credit cards, corporate bonds, savings accounts, and — one step further removed — the required return investors demand from risk assets like Bitcoin.

Our chart plots FRED's FEDFUNDS series: the effective federal funds rate, averaged monthly. That is the rate banks actually traded at, not the range the Fed announced.

The two are closely related — the effective rate is designed to trade inside the target range the Fed's rate-setting committee, the FOMC, agrees after each meeting — but they are not the same number. When headlines say "the Fed held rates at 4.25%–4.50%," that's the target range. FEDFUNDS is the rate the market actually settled on inside it, which is what this chart, and most long-run analysis built on FRED's figures, tracks.

When the Fed raises the target range, banks charge more to lend to each other overnight, and that higher cost gets passed along the chain — to variable-rate loans, to new corporate debt, to the yields investors can earn from cash and short-term bonds. Borrowing gets more expensive across the board, which tends to cool spending and investment.

Cutting the rate runs the same chain in reverse: cheaper borrowing, lower returns on cash-like instruments, and — the part that matters for crypto — a lower opportunity cost: less return given up by holding an asset that pays no interest of its own.

Our chart shades the rate into four bands: green below 2% (low/non-restrictive), yellow from 2% to 4.25% (neutral to mildly restrictive), orange from 4.25% to 5.25% (moderately restrictive), and red above 5.25% (high/restrictive).

Those cut-offs are our own reading of roughly where policy shifts from encouraging borrowing to discouraging it, built so you can place the current rate at a glance. They are not thresholds the FOMC publishes or acts on — its actual decisions weigh inflation, employment and the wider state of financial markets together, not a fixed line on any one chart.

The Fed Funds Rate has swung between extremes over the decades. It spiked into the high teens in the early 1980s as the Fed fought double-digit inflation, then spent most of the 2010s pinned near zero following the 2008 financial crisis — the zero-rate backdrop Bitcoin was born into in 2009.

It returned to near zero again from March 2020 through early 2022 in response to the pandemic, a period that overlapped with a large run-up in Bitcoin's price. The tightening cycle that followed — the fastest string of hikes in decades — took the rate from near zero to above 5%, overlapping with a sharp crypto drawdown. Overlap is not proof of causation on its own; it's one macro factor among several that moved at the same time.

It's the price of money. When it's expensive, capital gets pickier about where it goes. When it's cheap, speculative assets stop having to compete so hard for attention.

Watch the direction, not just the level. A rate that's high but has just started falling reads very differently from one that's low but climbing — the pivot itself, not the absolute number, is usually what markets react to first.

Pair it with the calendar. The FOMC meets on a fixed roughly six-week schedule; the rate only changes on those dates (or, rarely, in an emergency meeting). Between meetings, the line on this chart sits flat.

The Fed Funds Rate is a macro context indicator, not a cycle-timing one. It says nothing about where Bitcoin sits in its own market cycle, whether on-chain holders are in profit, or how stretched price is relative to trend — that work is done by the cycle indicators on our Heatmeters.

What it does is set the backdrop those cycle indicators operate in — how freely money is flowing through the wider economy. It is not currently a weighted input to the Bitcoin or Ethereum Heatmeter composite score; it sits alongside CPI, Core PCE and the Fed balance sheet in our standalone macro chart set, so you can read the policy environment directly.

Others in macro — Interest rates and the supply of money — the backdrop crypto ultimately trades against.

• 10-Year Treasury YieldThe long end of the curve — the market’s own verdict on growth and inflation.
• Treasury General AccountThe US Treasury’s cash balance, which drains or adds liquidity as it fills and empties.
• Treasury Debt RolloverHow much government debt matures each year and has to be refinanced.
• Consumer Price IndexHeadline inflation, year over year.
• Core PCEThe inflation measure the Federal Reserve actually targets.

Every indicator we track — the full glossary.