FOMC rate decision

What this actually is

The Federal Reserve sets one number: the overnight rate that banks charge each other to borrow. It sounds remote, but it is the price of money for everyone. Every other interest rate in the economy — mortgages, car loans, credit cards, business loans, the yield on savings — is built on top of it. Raise it and borrowing gets expensive, saving gets attractive, and demand cools. Cut it and the reverse. The Fed does this eight times a year to keep inflation near 2% and employment high.

Why it matters to a person

A one-point move changes the monthly payment on a $400,000 mortgage by roughly $250. It decides whether a young couple can buy, whether a business hires, and how much a retiree earns on savings. For markets it sets the discount rate: the higher it is, the less a dollar of profit ten years from now is worth today, which is why long-duration growth stocks fall hardest when rates rise.

For scale

Near zero from 2008 to 2015 and again through 2020–21. Raised from 0.25% to 5.5% between March 2022 and July 2023 — the fastest tightening since 1980. Held there for over a year, then cut through 2024–25. The 1980 peak was 20% under Volcker; the fifty-year average is roughly 4.5%, so today's levels are closer to normal than the 2010s were.

How to read a release

The mechanism

Sets the risk-free rate every asset is discounted against; the surprise versus futures pricing is what moves stocks, not the level.

What to watch: Target range for fed funds. Arrives 8 meetings a year; the effect typically lasts months. Impact tier 1 — Regime-setting: Moves everything and sets the direction for months or years. These are the discount rate, the level of earnings, the availability of credit, and the shocks large enough to stop the economy. If one of these turns, nothing else in the list matters much.

Primary source — federalreserve.gov ↗