Effective Fed Funds Rate Remains at 3.63% End of June, Following Three Cuts in 2025
Effective rate stable at 3.63% at end of June
The effective federal funds rate in the United States was 3.63% on June 30, 2026, unchanged from the last sessions of the month, according to the Federal Reserve's H.15 release on July 1, 2026. This level remains close to the center of the target range set by the Fed, maintained at 3.50%-3.75% during the FOMC meeting on June 17.
A Market Rate, Not Exactly the Benchmark Rate
The Federal Funds Effective Rate is not, strictly speaking, the Fed's monetary policy decision. It is the effective rate at which depository institutions lend balances to each other overnight, held at Federal Reserve banks. The FOMC's decision, on the other hand, involves a target range intended to guide this market rate.
A Pause Since the Beginning of the Year
The June decision confirms a pause initiated since the beginning of 2026. The FOMC calendar shows that the Fed maintained its target range at meetings in January, March, April, and June. On June 17, the committee voted unanimously, 12 to 0, to keep the target at 3.50%-3.75%.
This stabilization occurs after three successive 25 basis point cuts in the fall of 2025: in September, the target range was lowered to 4.00%-4.25%; in October, to 3.75%-4.00%; and then in December, to 3.50%-3.75%. The Fed did not announce any new cuts in the first half of 2026.
A 70 basis point drop year-on-year
The effective Fed funds rate was 4.33% in June 2025 in the monthly FEDFUNDS series from the St. Louis Fed. At 3.63% at the end of June 2026, the gap amounts to 0.70 percentage points, or 70 basis points. Compared to the starting level, this corresponds to a relative decrease of 16.17%.
Why This Rate Matters for the Markets
The federal funds rate serves as a benchmark for the U.S. money market. It influences short-term financing conditions and, with delays and based on market expectations, transmits to other credit segments: bank loans, bond rates, mortgage credit, or corporate financing. The pause in June does not necessarily mean that long-term rates or asset valuations will remain stable; it simply indicates that the central bank did not change its short-term rate target at that time.
A Cautious Fed in the Face of Inflation
In its statement on June 17, the FOMC notes that economic activity continues to advance at a solid pace, while inflation remains above the 2% target. The Fed also mentions price increases linked to supply shocks, particularly in energy. For investors, the message is less about ongoing monetary easing and more about stability: short-term U.S. rates are lower than a year ago, but the Fed did not initiate any new rate cuts in June.
This content has been automatically translated using artificial intelligence. While we strive for accuracy, some nuances may differ from the original French version.
