Many are watching the Fed hoping they will lower interest rates soon. However, a historical perspective of rates would suggest that’s unlikely.
The history of interest rates in the United States is a fascinating journey through economic highs and lows, shaped by various global and domestic events. After falling for three decades at the turn of the century, interest rates stood at 4 percent in 18351. However, over the last 58 years, the interest rates in the United States have averaged 6.1 percent, 5.59 percent when measured from 1971 until 2020, reaching an all-time high federal funds rate of 20 percent in March of 1980 and a record low of 0.25 percent in December of 20081.
In the early 2020s, the Federal Reserve implemented aggressive rate cuts to combat the economic fallout from the COVID-19 pandemic, bringing rates down to historic lows. However, as the economy began to recover, inflationary pressures necessitated a series of rate hikes starting in 2022². By 2023, the federal funds rate had risen to over 5%, reflecting the Fed’s commitment to controlling inflation², and a rate in line with historical averages.
Fast forward to 2025, the federal funds rate stands at 4.33%¹, a rate below historical averages, and seen as helping the Fed maintain a balanced a growing economy and sticky inflation. So, if you’ve been waiting for lower rates to refinance that high interest loan, you might be waiting until the next recession.
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Source: Conversation with Copilot, 2/25/2025
(1) Federal Funds Rate – 62 Year Historical Chart | MacroTrends. https://www.macrotrends.net/2015/fed-funds-rate-historical-chart; Trading Economics. (2025, February 25). Fed Funds Interest Rate. Retrieved from https://tradingeconomics.com/united-states/interest-rate; Neufeld, D. (2020, October 1). Visualizing the 200-Year History of U.S. Interest Rates. Visual Capitalist. Retrieved from Visual Capitalist
(2) U.S. federal funds rate 1954-2025 | Statista. https://www.statista.com/statistics/187616/effective-rate-of-us-federal-funds-monthly/.
(3) Federal Reserve Board – Implementation Note issued January 29, 2025. https://www.federalreserve.gov/newsevents/pressreleases/monetary20250129a1.htm.
(4) The Fed – Meeting calendars and information – Federal Reserve Board. https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm.
(5) The Fed – Monetary Policy: Monetary Policy Report (Branch). https://www.federalreserve.gov/monetarypolicy/2025-02-mpr-statement.htm.
(6) Federal Funds Rate History 1990 to 2024 – Forbes Advisor. https://www.forbes.com/advisor/investing/fed-funds-rate-history/.
