Line chart shows that the Federal funds target rate has topped out at lower levels over time.
Y-axis: Fed funds target rate—upper bound (%); X-axis: 1971-2022.
Seven U.S. recessions shown along with the Fed funds target rate
- Late 1973 to Q1 1975—The Fed funds target rate topped out at 13% in May 1974.
- January 1980 to July 1980—The funds target rate topped out at 20% in March 1980.
- July 1981 to November 1982—The funds rate topped out at 20% just before the recession in May 1981.
- July 1990 to March 1991—The funds rate topped out at nearly 10% before the recession in February 1989. An earlier rate spike to nearly 12% occurred in August 1984.
- March 2001 to November 2001—The recession was preceded by a target rate as high as 6.5% in 2000.
- December 2007 to June 2009—The recession was preceded by a target rate high of 5.25% in 2006-2007.
- February 2020 to April 2020—The recession was preceded by a target rate high of 2.5% in 2019.
Two arrows on the chart show directionally the decline of the funds target rate during this period. The first, steeper arrow, extends from the early 1980s to the late 1990s. The second arrow, with a shallower slope, extends from roughly 2001 to 2019.
Sources: Bloomberg and Wells Fargo Investment Institute. Monthly data from March 1, 1971 to March 31, 2022. For illustrative purposes only. Fed = Federal Reserve.
- We believe that the number of rate hikes in 2022 remains flexible and dependent on how the economy, the pandemic, and inflation levels continue to evolve.
- Over the past four decades, policy interest rates have topped out at progressively lower levels during monetary policy tightening, eventually pushing the economy into a recession.