Fed Prime Rate Dashboard

How the Fed Sets the Prime Rate

The prime rate is not set by the Federal Reserve directly. Instead, it follows a mechanical formula: each time the Federal Open Market Committee adjusts the federal funds target range, every major U.S. bank adjusts its prime rate by the same amount, usually within one business day. Since 1994, the spread between the fed funds upper bound and the prime rate has been exactly 3.00 percentage points. The Wall Street Journal prime rate, which is the most widely quoted benchmark, is determined by surveying the 10 largest U.S. banks.

At the current fed funds target of 3.50%–3.75%, the prime rate sits at 6.75%. The effective federal funds rate—the volume-weighted average of actual overnight transactions between banks—is 3.64%, well within the target band. This rate is published daily by the New York Federal Reserve and is available via their free Markets Data API.

Prime Rate vs Federal Funds Rate

The chart below shows the prime rate and federal funds upper bound over the past two years. Notice how the prime rate tracks the fed funds rate with a constant 3.00% spread. Data is sourced directly from the FRED DPRIME and DFEDTARU series.

SOFR Trend & Overnight Markets

The Secured Overnight Financing Rate replaced LIBOR as the primary benchmark for adjustable-rate financial products in the United States. SOFR is calculated from overnight Treasury repurchase agreement transactions and is published each business day by the New York Federal Reserve. Unlike the old LIBOR, SOFR is based on actual market transactions rather than bank estimates, making it more transparent and resistant to manipulation.

The SOFR averages (30-day, 90-day, 180-day) are particularly important for adjustable-rate mortgages and student loans, which often reset based on the 30-day SOFR average. The current 30-day average of 3.6589% is what your ARM lender would use for the next rate adjustment. The SOFR Index at 1.23710367 represents the cumulative compounded value of $1 invested at SOFR since April 2, 2018.

Treasury Yield Curve

The Treasury yield curve shows how interest rates vary across different maturities. When the curve is upward-sloping (longer maturities yield more), it generally signals expectations of economic growth. An inverted curve (short rates above long rates) has historically preceded recessions. The current curve shape, with the 2-year at 3.84% and the 10-year at 4.33%, shows a positive 2s/10s spread of 0.49 percentage points.

Impact on Consumer Rates

Every consumer financial product traces back to one of the benchmark rates on this page. Variable-rate products are tied to the prime rate (which follows the fed funds rate), while fixed-rate products are tied to Treasury yields of matching maturity. The Consumer Financial Protection Bureau recommends understanding which benchmark drives your loan so you can anticipate rate changes.

What Is the Current Prime Rate and How Is It Determined?

The current U.S. prime rate is 6.75%, effective since December 11, 2025. This rate is calculated using a fixed formula: the upper bound of the federal funds target range (currently 3.75%) plus a 3.00 percentage point spread. Every major U.S. bank follows this convention, which has been in place since 1994. When the Federal Open Market Committee votes to raise or lower the fed funds target, commercial banks adjust the prime rate by the identical amount—usually within 24 hours of the announcement.

The Wall Street Journal prime rate is the most commonly referenced version and is determined by polling the 10 largest U.S. banks. When at least seven of the ten change their rate, the WSJ updates its published figure. The FRED DPRIME series provides the complete daily history of the prime rate going back to January 1955, making it the most comprehensive public data source available for tracking prime rate changes over time.

The prime rate matters because it directly determines the cost of variable-rate consumer debt. Credit cards, home equity lines of credit, adjustable-rate business loans, and many private student loans are all priced as “prime plus a margin.” For example, a credit card with a margin of 15% would carry an APR of 21.75% at today’s 6.75% prime rate. When the Fed cuts rates, the prime rate drops and every product tied to it becomes cheaper automatically.

How Does the Federal Funds Rate Affect Mortgage Rates?

The federal funds rate influences mortgage rates, but not through a direct link. Fixed-rate mortgages are priced off the 10-year Treasury yield, not the overnight fed funds rate. The relationship works indirectly: when the Fed raises the funds rate to fight inflation, investors expect tighter financial conditions, which pushes Treasury yields higher. The spread between the 10-year yield and the average 30-year mortgage rate has historically ranged from 1.5% to 2.5%, and currently sits around 2.0 percentage points. This means that when the 10-year Treasury yield moves, mortgage rates tend to follow within days.

Adjustable-rate mortgages (ARMs), on the other hand, are directly tied to short-term benchmarks. Most new ARMs use the SOFR 30-day average as their index, which closely tracks the fed funds rate. A 5/1 ARM with a 2.50% margin over SOFR would currently carry a rate of approximately 6.16%. When the Fed eventually cuts rates, ARM holders see relief more quickly than fixed-rate borrowers, since the ARM index adjusts within weeks rather than depending on broader market sentiment.

For borrowers weighing a fixed versus adjustable mortgage, the decision hinges on the Fed’s projected rate path. If markets expect multiple rate cuts over the next two to three years, an ARM may offer meaningful savings. If rates are expected to hold steady or rise, locking in a fixed rate provides certainty. The CME FedWatch tool provides market-implied probabilities for each upcoming FOMC meeting, helping borrowers gauge where rates may be headed.

What Is SOFR and How Does It Replace LIBOR?

SOFR (Secured Overnight Financing Rate) is the benchmark interest rate that replaced LIBOR for U.S. dollar-denominated loans and derivatives. Published daily by the New York Federal Reserve, SOFR measures the cost of borrowing cash overnight using U.S. Treasury securities as collateral. Unlike LIBOR, which was based on bank estimates and was susceptible to manipulation, SOFR is calculated from actual transaction data—typically over $2 trillion in daily repo market volume—making it far more transparent and resistant to abuse.

The transition from LIBOR to SOFR became mandatory after June 30, 2023, when the remaining USD LIBOR tenors were officially discontinued. Adjustable-rate mortgages, student loans, corporate credit facilities, and interest rate swaps that previously referenced LIBOR now reference SOFR or its term variants. The CME Group publishes forward-looking Term SOFR rates for 1-month, 3-month, 6-month, and 12-month periods, which serve as practical replacements for the corresponding LIBOR tenors that lenders relied on for decades.

For consumers, the most important SOFR variant is the 30-day average, which is used as the index for most new adjustable-rate mortgages. Because SOFR is a secured (collateralized) rate while LIBOR was unsecured, SOFR tends to run slightly lower. Lenders typically adjusted their margins upward during the transition to keep overall borrowing costs comparable. Borrowers with legacy LIBOR-linked loans that were converted to SOFR should check their conversion terms, as the spread adjustment (usually around 0.11% for 1-month, 0.26% for 3-month) was added to maintain economic equivalence.

Prime Rate History (2000–2026)

The prime rate has ranged from a low of 3.25% (December 2008 through November 2015) to a high of 9.50% (January 2001) over the past quarter century. The FRED DPRIME series provides the complete daily history going back to 1955. The annual averages below are calculated by the St. Louis Fed.

Frequently Asked Questions

What is the Fed prime rate today?

The U.S. prime rate is 6.75% as of 2026-03-24, according to the FRED DPRIME series. This rate has been in effect since December 11, 2025, when the Federal Reserve cut the federal funds target by 25 basis points to 3.50%–3.75%. The prime rate equals the fed funds upper bound (3.75%) plus a fixed 3.00% spread.

How is the prime rate different from the federal funds rate?

The federal funds rate is the overnight rate at which banks lend reserves to each other. The FOMC sets a target range (currently 3.50%–3.75%) and the actual effective rate trades within it (currently 3.64%). The prime rate is always 3.00 percentage points above the fed funds upper bound. It serves as the benchmark for consumer lending products like credit cards, HELOCs, and business loans. Whenever the FOMC changes its target, the prime rate moves by the same amount within one business day.

What is SOFR and why does it matter for my loans?

SOFR (Secured Overnight Financing Rate) is currently 3.64% based on $3,063 billion in daily Treasury repo transactions. It replaced LIBOR as the benchmark for adjustable-rate mortgages, student loans, and many commercial loans. If you have an ARM, your rate likely resets based on the SOFR 30-day average (currently 3.6589%) plus your lender’s margin. You can track it daily via the free NY Fed Markets API.

Where does the data on this page come from?

All rates are sourced from two official U.S. government APIs updated daily. The FRED API (Federal Reserve Bank of St. Louis) provides the prime rate, fed funds rate, Treasury yields, mortgage rates, and economic indicators like CPI and unemployment. The NY Fed Markets Data API provides real-time reference rates (SOFR, EFFR, OBFR, TGCR, BGCR) including transaction volumes and percentile distributions. Both APIs are free and publicly accessible.

When will the prime rate change next?

The prime rate only changes when the FOMC adjusts the federal funds target range. The next FOMC meeting is April 28–29, 2026. The CME FedWatch tool currently prices ~86% odds of no change at that meeting. The first meeting where a cut is meaningfully priced in is June 17–18, 2026 (~40% probability). If the FOMC cuts by 25 basis points, the prime rate would drop from 6.75% to 6.50%.

Related Resources

• Current Prime Rate — detailed prime rate analysis with bank-by-bank rates
• FOMC Meeting Schedule & Predictions — countdown to next decision with probability analysis
• U.S. Interest Rates Dashboard — comprehensive multi-rate overview
• Current Mortgage Rates — daily updated 30-year, 15-year, ARM rates
• Best CD Rates — top certificate of deposit rates by term
• Best High-Yield Savings Accounts — top savings rates updated daily
• Prime Rate & Credit Cards — how prime rate changes affect your APR
• Prime Rate & Mortgages — HELOC and ARM rate connection to prime

References

1. Federal Reserve Board. Selected Interest Rates (H.15 Release). Updated daily.
2. Federal Reserve Bank of St. Louis. FRED: Bank Prime Loan Rate (DPRIME).
3. Federal Reserve Bank of New York. Markets Data API — Reference Rates.
4. Federal Reserve Bank of New York. Secured Overnight Financing Rate (SOFR).
5. CME Group. CME FedWatch Tool.
6. Wall Street Journal. WSJ Prime Rate.
7. Consumer Financial Protection Bureau. Consumer Financial Protection Bureau.
8. U.S. Department of the Treasury. Treasury Yield Curve Data.
9. Freddie Mac. Primary Mortgage Market Survey (PMMS).
10. Bureau of Labor Statistics. Consumer Price Index (CPI).

Disclaimer: The information on this page is sourced directly from official Federal Reserve and government APIs and is provided for educational purposes only. It does not constitute financial advice. Consult with a qualified financial advisor before making borrowing or investment decisions. Rates shown are updated daily but may not reflect intraday changes. PrimeRates.com is not affiliated with the Federal Reserve System.