Fed Cuts Rate Again in 2026 as Easing Cycle Continues

The federal funds effective rate in the US continued its downward adjustment in 2026 as the Federal Reserve advanced its policy easing cycle. In January 2025, the rate was at **** percent following a rate cut, but it remained unchanged until September when it was reduced to **** percent. The easing continued late in the year with additional cuts in November and December, lowering the rate to **** percent.

The prolonged period of elevated interest rates began after the COVID-19 pandemic. In early 2020, the federal funds effective rate was sharply reduced in response to the economic shock caused by the pandemic, falling from **** percent in February to **** percent in March and reaching **** percent by April. The emergency cuts combined with quantitative easing aimed to stabilize financial markets and support economic activity.

The rate remained near zero for nearly two years before the Federal Reserve initiated a tightening cycle in early 2022, raising the rate from **** percent in April 2022 to a peak of **** percent in August 2023. After holding rates steady for more than a year, the Federal Reserve began reversing course in September 2024, cutting the rate to **** percent.

The interest rate adjustments following the COVID-19 pandemic reflected a largely coordinated global response. Central banks worldwide adopted aggressive monetary easing to counter the economic shock, with the Federal Reserve cutting the federal funds rate from **** percent in February to **** percent by April, in line with actions taken globally.