it has been confirmed at this level since the FED meeting that took place on 12-2025
it is at the lowest level observed in 3 years
IntroThe federal funds rate is the rate banks charge each other for short-term loans to meet their reserve requirements.
The federal funds rate is a cornerstone of US monetary policy and a key driver of economic activity. It refers to the target interest rate range set by the Fed's Federal Open Market Committee (FOMC), its policymaking body.
Chart guideIn this chart above we look at the currently applied interest rate, which - as anticipated above - is the main interest rate in the US, set by the ECB approximately every two months (or 8x a year), based on prevailing economic conditions.
Rates: a key monetary policy toolThe process through which monetary policy decisions affect the overall economy, and price levels in particular, is called the monetary policy transmission mechanism. This mechanism comprises a chain of effects whereby monetary policy decisions are ultimately transmitted to price levels. The central bank plays a pivotal role in this process, since it is the sole issuer of banknotes and bank reserves, which are the two components of the monetary base. Arguably the most important stage in the monetary policy transmission mechanism is a change in policy interest rates.
Interest rates influence both economic activity and prices (= inflation). Lower interest rates stimulate both spending and borrowing (and thus long-term investing in productive activities), supporting economic growth and eventually rising consumer prices (=higher inflation). Higher interest rates make borrowing more costly and savings more appealing, so spending fades and prices tend to cool-down (=lower inflation).
Fed funds futures
future US interest rate levels
market expectations via FED Fund futures
where do investors see rates go next?
First forecast from: Mar26
Cumulative rate changes expected for the next 6 months:
0 bps
Detailed expectations for the upcoming ECB meetings:
Mar26: no rate change is expected
Apr26: no rate change is expected
May26: a 25bps hike is expected with 16% probability
Jun26: a 25bps hike is expected with 16% probability
Jul26: a 25bps hike is expected with 16% probability
Aug26: a 25bps hike is expected with 16% probability
IntroFED fund futures are primarily used for hedging and speculating on changes in short-term interest rates in the US. They allow market participants to manage interest rate risk, protect themselves from potential losses due to interest rate fluctuations, or speculate on future interest rate movements.
Chart guideIn the chart above we show the (mathematically obtained) curve of expected interest rates, daily priced according to expectations and assumptions of FED Fund futures' investors. We also show where potential rate cuts or hikes are expected by investors in which future month.
Let's remember that: (1) future interest rates here may be expected to go lower or higher depending on investors' current preferences; (2) future interest rates may change substantially from one day to another, subject to market movements;
Chart useDespite being based on pure expectations and not hard truths, this curve in the chart above is probably the most respected bellweather available to forecast the direction of future interest rates in the US. Investors expectations are derived from the professional observation of current macroeconomic events and official data, and moving asset prices in various different markets.