The federal funds rate is 4.25%–4.50% as of May 2026, set by the Federal Reserve’s Federal Open Market Committee (FOMC). This is the benchmark interest rate that influences virtually every borrowing and saving rate in the US economy — from savings account APYs and CD rates to mortgage rates, credit cards, and auto loans.
Current rate at a glance: Fed funds target range = 4.25%–4.50% | Prime rate = 7.50% | Next FOMC meeting = June 17–18, 2026
Current Federal Funds Rate (May 2026)
| Rate | Current Level | Last Changed |
|---|---|---|
| Federal funds target range | 4.25%–4.50% | December 18, 2024 |
| Federal funds effective rate | ~4.33% | Daily average |
| Prime rate | 7.50% | December 18, 2024 |
| Discount rate | 4.50% | December 18, 2024 |
| Interest on reserve balances (IORB) | 4.40% | December 18, 2024 |
Source: Federal Reserve H.15 Selected Interest Rates. Updated monthly.
Recent Fed Rate Changes
| Date | Change | New Target Range | Reason |
|---|---|---|---|
| December 18, 2024 | −0.25% | 4.25%–4.50% | Continued inflation progress |
| November 7, 2024 | −0.25% | 4.50%–4.75% | Labor market softening |
| September 18, 2024 | −0.50% | 4.75%–5.00% | First cut since 2020 |
| July 26, 2023 | +0.25% | 5.25%–5.50% | Peak rate — 23-year high |
| May 3, 2023 | +0.25% | 5.00%–5.25% | Ongoing inflation fight |
| March 22, 2023 | +0.25% | 4.75%–5.00% | |
| February 1, 2023 | +0.25% | 4.50%–4.75% |
The Fed has held rates at 4.25%–4.50% since December 2024 — a pause to assess whether inflation is sustainably returning to the 2% target while keeping the labor market intact.
2026 FOMC Meeting Schedule
| Meeting Dates | Decision Date | Rate Decision |
|---|---|---|
| January 28–29, 2026 | January 29 | Hold — 4.25%–4.50% |
| March 18–19, 2026 | March 19 | Hold — 4.25%–4.50% |
| May 6–7, 2026 | May 7 | Hold — 4.25%–4.50% |
| June 17–18, 2026 | June 18 | Upcoming |
| July 29–30, 2026 | July 30 | TBD |
| September 16–17, 2026 | September 17 | TBD |
| October 28–29, 2026 | October 29 | TBD |
| December 10–11, 2026 | December 11 | TBD |
Rate decisions are announced at 2:00 PM ET on the second day of each meeting. The Summary of Economic Projections (“dot plot”) is released quarterly: March, June, September, and December.
How the Federal Funds Rate Affects Your Money
Savings Accounts and CDs
When the Fed funds rate is high, savers benefit. Banks must offer competitive yields to attract deposits. In May 2026:
| Account Type | Typical Rate Range |
|---|---|
| High-yield savings (online banks) | 4.50%–5.00% APY |
| National average savings | 0.41% APY |
| 1-year CD (top rates) | 4.75%–5.10% APY |
| 5-year CD (top rates) | 4.00%–4.40% APY |
| Money market account (top rates) | 4.40%–4.75% APY |
The gap between big-bank savings rates (near 0%) and HYSA rates (4.50%+) is largely because big banks don’t need deposits to compete. If your savings aren’t in a high-yield savings account, you’re leaving hundreds of dollars per year on the table at these rates.
Example: $25,000 in savings
- Big bank at 0.01%: $2.50/year
- HYSA at 4.75%: $1,187.50/year
- Difference: $1,185 in annual interest
Mortgages
Mortgage rates don’t move in lockstep with the fed funds rate — they follow the 10-year Treasury yield, which is influenced by broader economic expectations. However, Fed rate policy shapes the overall rate environment.
| Loan Type | May 2026 Rate Range |
|---|---|
| 30-year fixed mortgage | 6.50%–7.25% |
| 15-year fixed mortgage | 5.75%–6.50% |
| 5/1 ARM | 5.50%–6.25% |
| HELOC | 7.75%–9.50% (prime + margin) |
HELOCs and variable-rate mortgages are directly tied to the prime rate (currently 7.50%), so they will drop immediately when the Fed cuts rates.
Credit Cards
Most variable-rate credit cards are priced at prime rate + a margin (typically 9–15%). With the prime rate at 7.50%, credit card APRs are running at:
- Average credit card APR: ~21%–24%
- Store cards and subprime cards: 26%–36%
Unlike mortgages, credit card rates change within one or two billing cycles after a Fed decision. Carrying a balance right now is particularly costly. Paying down high-rate credit card debt delivers a guaranteed return equal to the card’s APR.
Auto Loans
Auto loan rates are influenced by broader credit market conditions, not the fed funds rate directly, but are elevated by the high-rate environment:
- New car loan (60 months): 6.0%–8.5%
- Used car loan (48 months): 7.5%–10.5%
2026 Rate Outlook — Will the Fed Cut?
As of May 2026, the FOMC has held rates steady for five consecutive meetings. Fed Chair Jerome Powell has signaled the Fed needs “greater confidence” that inflation is on a sustained path back to 2% before cutting further.
Market expectations (May 2026):
- 0 cuts by June: ~70% probability
- 1 cut (to 4.00%–4.25%) by December: ~55% probability
- 2 cuts by December: ~25% probability
Probabilities based on CME FedWatch Tool fed funds futures pricing. Subject to change with each CPI, PCE, and jobs report.
Key data to watch:
- CPI report (monthly, Bureau of Labor Statistics) — headline and core inflation
- PCE price index (monthly, Bureau of Economic Analysis) — the Fed’s preferred inflation gauge
- Jobs report / NFP (monthly, Bureau of Labor Statistics) — labor market strength
- FOMC meeting minutes (released 3 weeks after each meeting)
Federal Funds Rate vs. Other Key Rates
| Rate | Current Level | Set By | Moves With Fed? |
|---|---|---|---|
| Federal funds rate | 4.25%–4.50% | FOMC | — |
| Prime rate | 7.50% | Banks (follows Fed) | Yes — immediately |
| 10-year Treasury yield | ~4.40%–4.60% | Market | Loosely |
| 30-year fixed mortgage | ~6.75%–7.00% | Market | Loosely |
| HYSA average (top rates) | ~4.50%–5.00% | Banks | Yes — within weeks |
| Average savings (all banks) | 0.41% | Banks | Slowly/partially |
Brief History: How We Got to 4.25%–4.50%
The Fed cut rates to 0.00%–0.25% in March 2020 to support the economy through the COVID-19 pandemic. As inflation surged to 9.1% (June 2022) — a 40-year high — the Fed launched its most aggressive tightening cycle since the early 1980s, raising rates by 5.25 percentage points in 16 months to a 23-year peak of 5.25%–5.50% in July 2023.
Inflation has since declined significantly — to approximately 2.8%–3.2% year-over-year in early 2026 — though it remains above the Fed’s 2% target. The Fed cut rates three times in late 2024 and early 2025, then paused. For the full rate history from 1954, see the History of the Federal Funds Rate.
Rate data sourced from the Federal Reserve H.15 release. Meeting schedule from federalreserve.gov. Savings and mortgage rate ranges reflect top nationally available offers and averages as of May 2026. Rates change frequently — verify current rates before making financial decisions.
Related Reading
- History of the Federal Funds Rate 1954–2026 — full rate timeline with key cycles
- What Is the Federal Funds Rate? — how the rate is set, what it means for borrowers and savers
- Best High-Yield Savings Accounts 2026 — capture the full benefit of the current rate environment
- Interest Rates Guide 2026 — prime rate, APY, and how all rates connect
The content on Wealthvieu is for informational purposes only and should not be considered financial, tax, or investment advice. Consult a qualified professional before making financial decisions. Full disclaimer · Editorial policy