United States Interest Rate

The benchmark interest rate in the United States was last reported at 0.25 percent. in the United States, authority for interest rate decisions is divided between the Board of Governors of the Federal Reserve (Board) and the Federal Open Market Committee (FOMC). The Board decides on changes in discount rates after recommendations submitted by one or more of the regional Federal Reserve Banks. The FOMC decides on open market operations, including the desired levels of central bank money or the desired federal funds market rate. From 1971 until 2010 the United States' average interest rate was 6.45 percent reaching an historical high of 20.00 percent in March of 1980 and a record low of 0.25 percent in December of 2008. This page includes: United States Interest Rate chart, historical data and news.

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U.S. Fed Said No Rate Hikes Until at Least Late 2014
Published on 1/25/2012 5:50:33 PM | By TradingEconomics.com, Fed

The U.S. Federal Reserve on Wednesday said it will not raise interest rates until at least late 2014, even later than investors expected, in an effort to support a sluggish economic recovery.

Federal Reserve Statement

Information received since the Federal Open Market Committee met in December suggests that the economy has been expanding moderately, notwithstanding some slowing in global growth. While indicators point to some further improvement in overall labor market conditions, the unemployment rate remains elevated. Household spending has continued to advance, but growth in business fixed investment has slowed, and the housing sector remains depressed. Inflation has been subdued in recent months, and longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects economic growth over coming quarters to be modest and consequently anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that over coming quarters, inflation will run at levels at or below those consistent with the Committee's dual mandate.

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.

The Committee also decided to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Sarah Bloom Raskin; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who preferred to omit the description of the time period over which economic conditions are likely to warrant exceptionally low levels of the federal funds rate.

United States News

U.S. Annual Inflation Rate Down to 2.9% in January
Published: 2/17/2012 7:16:50 PM By: TradingEconomics.com, U.S. Bureau of Labor Statistics
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in January on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported. Over the last 12 months, the all items index increased 2.9 percent before seasonal adjustment

U.S. Trade Deficit Widens in December
Published: 2/10/2012 1:38:25 PM By: TradingEconomics.com, U.S. Department of Commerce
Total December exports of $178.8 billion and imports of $227.6 billion resulted in a goods and services deficit of $48.8 billion, up from $47.1 billion in November, revised.

U.S. Jobless Rate Down to 8.3%, Nonfarm Payrolls Up by 243K
Published: 2/3/2012 1:40:28 PM By: TradingEconomics.com, U.S. Bureau of Labor Statistics
Total U.S. nonfarm payroll employment rose by 243,000 in January, and the unemployment rate decreased to 8.3 percent, the U.S. Bureau of Labor Statistics Total U.S.nonfarm payroll employment rose by 243,000 in January, and the unemployment rate decreased to 8.3 percent, the U.S. Bureau of Labor Statistics reported on February 3rd. Job growth was widespread in the private sector, with large employment gains in professional and business services, leisure and hospitality, and manufacturing.

U.S. Economy Expands 2.8% in Q4
Published: 1/27/2012 5:44:01 PM By: TradingEconomics.com, Bureau of Economic Analysis
U.S.real gross domestic product increased at an annual rate of 2.8 percent in the fourth quarter of 2011 (that is, from the third quarter to the fourth quarter), according to the "advance" estimate released by the Bureau of Economic Analysis.

U.S. Fed Said No Rate Hikes Until at Least Late 2014
Published: 1/25/2012 5:50:33 PM By: TradingEconomics.com, Fed
The U.S. Federal Reserve on Wednesday said it will not raise interest rates until at least late 2014, even later than investors expected, in an effort to support a sluggish economic recovery.

U.S.Annual Inflation Down to 3% in December
Published: 1/19/2012 6:42:11 PM By: TradingEconomics.com, U.S. Bureau of Labor Statistics
Over the last 12 months, Consumer Price Index for All Urban Consumers (CPI-U)increased 3.0 percent before seasonal adjustment.It was unchanged in December on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported on January 19th.

U.S. Trade Deficit Widens in November
Published: 1/13/2012 3:48:56 PM By: TradingEconomics.com, the Department of Commerce
November exports of $177.8 billion and imports of $225.6 billion resulted in a goods and services deficit of $47.8 billion, up from $43.3 billion in October, revised.

Unemployment Rate Falls to 8.5 percent
Published: 1/6/2012 1:49:00 PM By: U.S. Bureau of Labor Statistics
Nonfarm payroll employment rose by 200,000 in December, and the unemployment rate, at 8.5 percent, continued to trend down, the U.S. Bureau of Labor Statistics reported. Job gains occurred in transportation and warehousing, retail trade, manufacturing, health care, and mining.

U.S. GDP Revised Down to 1.8% in Q3
Published: 12/22/2011 1:36:38 PM By: TradingEconomics.com, US Bureau of Economic Analysis
U.S. real gross domestic product increased at an annual rate of 1.8 percent in the third quarter of 2011 (that is, from the second quarter to the third quarter), according to the "third" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 1.3 percent.

U.S. Annual Inflation Down to 3.4% in November
Published: 12/16/2011 1:37:34 PM By: TradingEconomics.com, US Bureau of Labor Statistics
The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in November on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported on December 16th. Over the last 12 months, the all items index increased 3.4 percent before seasonal adjustment.

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Interest Rate Term Structure Definition

The interest rate term structure is the relation between the interest rate and the time to maturity of the debt for a given borrower in a given currency. For example, the current U.S. dollar interest rates paid on U.S. Treasury securities for various maturities are closely watched by many traders, and are commonly plotted on a graph such as the one on the right which is informally called "the yield curve." More formal mathematical descriptions of this relation are often called the term structure of interest rates.

Yield curves are usually upward sloping asymptotically; the longer the maturity, the higher the yield, with diminishing marginal growth. There are two common explanations for this phenomenon. First, it may be that the market is anticipating a rise in the risk-free rate. If investors hold off investing now, they may receive a better rate in the future. Therefore, under the arbitrage pricing theory, investors who are willing to lock their money in now need to be compensated for the anticipated rise in rates — thus the higher interest rate on long-term investments.However, interest rates can fall just as they can rise.

Another explanation is that longer maturities entail greater risks for the investor (i.e. the lender). Risk premium should be paid, since with longer maturities, more catastrophic events might occur that impact the investment. This explanation depends on the notion that the economy faces more uncertainties in the distant future than in the near term, and the risk of future adverse events (such as default and higher short-term interest rates) is higher than the chance of future positive events (such as lower short-term interest rates). This effect is referred to as the liquidity spread. If the market expects more volatility in the future, even if interest rates are anticipated to decline, the increase in the risk premium can influence the spread and cause an increasing yield (source: wikipedia).