Primary credit rate in the U.S. 2003-2026

Primary credit rate in the United States from 2003 to 2026

The primary credit rate is the interest rate the Federal Reserve charges financially sound banks to borrow short-term money from its discount window. Introduced on 9 January 2003, it has ranged from a record high of 6.25 percent in 2006 to a record low of 0.25 percent in 2020, and stands at 3.75 percent as of June 2026. Primary credit is available to generally sound depository institutions without requiring them to seek other funds first, which makes the primary credit rate the headline cost of last-resort borrowing for banks in the United States. Unlike the federal funds rate, which is a market rate that banks negotiate among themselves, the primary credit rate is set directly by the Federal Reserve Board, making it one of the few interest rates the central bank controls outright rather than merely influences.

Often called the Federal Reserve discount rate, the primary credit rate is set relative to the federal funds target and moves in step with wider US monetary policy. The path sits alongside our short-term interest rates worldwide overview and our federal funds rate coverage.

A full history in one line: the primary credit rate peaked at 6.25 percent in 2006, fell to a record low of 0.25 percent in 2020, surged to 5.50 percent in 2023, and stands at 3.75 percent in 2026.

From the housing boom of the mid-2000s through the financial crisis, the zero-rate decade and the inflation shock of the 2020s, the rate traces the whole arc of recent US policy, themes our central banks and financial markets in the US overviews explore.

A note on the data. The figures are based on the Federal Reserve H.15 release for the discount window primary credit rate, shown as approximate year-end levels in percent. The 2026 figure is as of June 2026 and the rate can change at any FOMC meeting. Because the rate is reported for the Federal Reserve Bank of New York and applies uniformly across the system, a single national figure captures the cost of primary credit for banks anywhere in the country, which is why the series is so widely used as a benchmark. All values are subject to revision and reflect the rate in effect at the relevant date, so small differences from other published series usually come down to whether a figure is a year-end level, a monthly average or a daily reading.

The Primary Credit Rate, Year by Year

The table shows the primary credit rate and the federal funds rate side by side for key years from 2003 to 2026. It makes clear how closely the two move together and how the gap between them has narrowed over time. Reading the two columns together shows that for most of the period the primary credit rate sat a fixed distance above the federal funds rate, until that distance was closed to zero in 2020, after which the two figures have moved in lockstep at the same level. The side-by-side format is the simplest way to see the single most important structural change in the series, namely the closing of the gap between the two rates, which turned the primary credit rate from a penalty rate into one that simply matches the top of the target range.

How Does the Primary Credit Rate Differ From the Federal Funds Rate?

The primary credit rate has always sat above the federal funds rate but below the prime rate, forming the upper part of the Federal Reserve rate corridor. It is a backstop rate, priced so that banks borrow from each other first and turn to the Fed only when they need to. The order is consistent: the federal funds rate sits at the bottom as the market rate between banks, the primary credit rate sits just above it as the Fed direct lending rate, and the prime rate sits about three percentage points higher as the rate banks charge their strongest customers. This layering is deliberate, because the Federal Reserve wants healthy banks to manage their day-to-day funding in the open market and to treat the discount window as a backstop, which is why the primary credit rate has traditionally been priced as a penalty above the market rate.

The federal funds rate is the market rate banks charge each other overnight, the primary credit rate is what the Fed itself charges at the discount window, and the prime rate, which banks charge their best customers, sits about three points higher, shaping loans across our Nasdaq stock market coverage.

Three rates, one direction: the federal funds rate sits at the bottom, the primary credit rate just above it, and the prime rate about three points higher, with all three moving together on every Fed decision.

Because all three rates move together with FOMC decisions, the lines run almost in parallel, rising and falling as one. The primary credit rate is the Fed direct lending rate, the price of borrowing straight from the central bank rather than from another bank. The near-parallel movement of the three rates is no accident, since the prime rate is fixed by convention at three points above the federal funds target and the primary credit rate is set directly by the Federal Reserve in relation to the same target, so all three shift together whenever the FOMC acts. For borrowers and savers, the practical upshot is that watching any one of these three rates gives a good sense of the others, since they rise and fall as a group, which is why a single Federal Reserve decision can ripple through mortgages, business loans and savings rates all at once.

Why the Spread to the Federal Funds Rate Narrowed

The gap between the primary credit rate and the federal funds rate has shrunk from 100 basis points in 2003 to zero since 2020. In other words, borrowing from the Fed discount window once cost a full point more than the market rate, and now costs the same. That narrowing happened in three clear steps, from a 100 basis point spread at the 2003 launch, to 50 basis points after the 2008 crisis, to zero from March 2020, each move designed to make the discount window a more practical source of funding for banks under stress. The decision to close the spread entirely in 2020 marked a philosophical shift, as the Federal Reserve moved away from treating discount window borrowing as something to be discouraged and toward presenting it as a normal, readily available tool for sound banks to use without stigma.

When the program began, the Fed set primary credit a full percentage point above the federal funds target, then narrowed the spread to 50 basis points during the 2008 crisis, and finally to zero in March 2020, a shift our global financial markets overview helps frame.

The gap closes: the primary credit rate once sat 100 basis points above the federal funds rate, narrowed to 50 in 2008, and has matched the top of the target range exactly since 2020.

Cutting the spread to zero was meant to remove the stigma of borrowing from the Fed and to make the discount window a more useful safety valve. The change proved its worth in the 2023 banking turmoil, when stressed banks leaned heavily on the window. During the March 2023 banking turmoil, when several regional banks failed, the zero spread and an emergency lending program saw discount window and related borrowing surge to record levels, proving that the redesigned window could deliver liquidity quickly when the financial system came under acute stress. The episode underlined how far the philosophy of the discount window had travelled since 2003, from a stigmatised facility of last resort to a readily available source of liquidity that policymakers actively encouraged banks to tap when markets seized up.

The Primary Credit Rate by Era

Averaged by era, the primary credit rate splits the period into clear chapters. It averaged about 4.3 percent in the pre-crisis years of 2003 to 2007, collapsed to under 1 percent through the zero-rate decade, and climbed back above 4 percent in the high-inflation 2020s. Splitting the period into eras shows that the rate spent far more time low than high, with the pre-crisis years of 2003 to 2007 standing out as the only sustained stretch above 4 percent until the inflation fight of the 2020s pushed it back up there again. The era averages also reveal how brief the high-rate periods were compared with the long years of cheap money, a balance that tilted decisively toward low rates in the fifteen years after the 2008 crisis before inflation reversed it.

The lowest era by far was the 2020 to 2021 pandemic stretch, when the rate sat at just 0.25 percent, while the 2022 to 2023 inflation fight pushed the average back to around 5 percent, the kind of swing our developed and emerging share price index overview also captures.

Long lows, brief highs: the rate averaged about 4.3 percent before the financial crisis, collapsed below 1 percent through the zero-rate decade, and climbed back above 4 percent in the inflationary 2020s.

Each era reflects the dominant economic worry of its time, from the housing boom and bust to the long fight against deflation and then the sudden return of inflation. The primary credit rate, as a backstop, faithfully followed each of these turns. The sharpness of the contrast between eras, from above 4 percent to near zero and back, is what makes the primary credit rate such a vivid record of how dramatically the economic priorities of the United States shifted across these two decades.

Every Rate Cycle Since 2003

Across six distinct rate cycles since 2003, the primary credit rate has repeatedly climbed and fallen by several percentage points. The largest single move was the 2022 to 2023 hiking cycle, which lifted the rate from 0.25 percent to 5.50 percent. Each cycle tells its own story, from the steady climb of the housing boom to the emergency cuts of 2008 and 2020 and the rapid tightening of 2022, with the rate covering five or six percentage points of ground in the larger moves. The dumbbell view, showing where each cycle began and ended, captures the full range of the rate far better than a single snapshot, revealing both the scale of the climbs during expansions and the depth of the cuts during downturns.

The deepest cuts came in 2008, when the rate fell more than four points as the financial crisis hit, and in 2020, when it dropped to its record low, swings that rippled through markets tracked in our global stock markets by country overview.

Slow up, fast down: each cycle shows the rate climbing gradually during expansions and falling sharply during the 2008 and 2020 crises, with the 2022 to 2023 surge the largest single climb.

The pattern of sharp rises followed by equally sharp falls is typical of US monetary policy, which tends to tighten gradually and then loosen quickly when the economy weakens. The primary credit rate mirrors that rhythm cycle after cycle. The repeated pattern of slow climbs and fast falls reflects the asymmetry at the heart of monetary policy, where central banks raise rates cautiously to avoid choking growth but cut them aggressively once a downturn or crisis is clearly under way.

When the Fed Raised and Cut Rates

Year-to-year changes show the Federal Reserve raised the primary credit rate in bursts and cut it in even sharper drops. The biggest single-year jump was a rise of 4.25 points in 2022, while the steepest fall was a drop of 4.25 points in 2008. The contrast between the long flat stretches and the sudden bursts of change is the defining feature of the year-by-year record, showing how the Federal Reserve tends to wait, watch, and then act decisively when inflation or a crisis forces its hand. Translating the rate into annual changes turns the smooth line into a series of discrete policy decisions, each one the product of an FOMC meeting weighing inflation, employment and financial conditions before settling on whether to raise, cut or hold.

Long stretches of no change, especially from 2010 to 2014 and again in 2021, sit between the bursts of action, underlining how central banks prefer to hold steady and then move decisively, a pattern our leading investment banks coverage reflects.

Bursts and pauses: the rate rose in small annual steps but was cut in large leaps, with a record 4.25 point jump in 2022 and an equally large 4.25 point drop in 2008.

The asymmetry is striking. Rate rises tend to come in small, steady steps over several years, while cuts arrive fast and deep in response to a crisis, which is why the down moves on the chart are so much larger than the up moves. This asymmetry between gradual hikes and rapid cuts is visible in almost every cycle, and it explains why the largest single-year moves in the record are nearly always cuts, delivered in response to the 2008 crisis and the 2020 pandemic.

How Long Did Rates Stay Low?

For roughly ten of the twenty-four years since 2003, the primary credit rate sat below 1 percent, underlining how unusual the zero-rate era was. Only three years saw the rate above 5 percent, all of them tied to either the 2006 peak or the 2023 inflation peak. The breakdown by rate band underlines just how extraordinary the period was, with the primary credit rate spending almost half of the twenty-four years below 1 percent, a level that would once have been considered an emergency setting rather than a near-permanent state. Grouping the years by rate band rather than by date offers a different lens, showing not when rates were low or high but for how long, and the answer is that low rates dominated the period to a degree that would have surprised earlier generations of central bankers.

The long stretch of very low rates, from 2008 through 2015 and again in 2020 and 2021, shaped a generation of cheap borrowing, lifting asset prices in ways our gold as an investment overview describes.

Half the period near zero: for about ten of the twenty-four years the rate sat below 1 percent, and only three years saw it above 5 percent, all tied to the 2006 and 2023 peaks.

The distribution shows just how much of the period was spent in emergency mode. Rates near zero, once considered a temporary crisis tool, became the norm for the better part of a decade before inflation forced them sharply higher. The sheer length of time the rate spent near zero helps explain why the return of higher rates in 2022 felt so jarring, since a whole generation of borrowers had known nothing but cheap money for most of their financial lives.

The Primary Credit Rate and Inflation

The primary credit rate tracks inflation closely, rising when prices surge and falling when they cool. The clearest example is 2022, when inflation hit about 8 percent and the Fed raised the rate by more than four points in a single year. The link between the rate and inflation runs in both directions over time, as the Fed raises the primary credit rate to cool an overheating economy and cuts it to support a weak one, so the rate effectively rises and falls with the inflation it is trying to control. Because the primary credit rate moves with the federal funds rate, and the federal funds rate responds to inflation, the primary credit rate ends up tracking the inflation rate with a lag, climbing as price pressures build and easing as they fade.

In the low-inflation 2010s, by contrast, the rate stayed near zero because prices were rising too slowly, and in 2009 it was cut hard as inflation briefly turned negative, a dynamic our biggest companies by market value coverage connects to valuations.

The rate follows prices: the primary credit rate tracks inflation closely, surging in 2022 as prices hit about 8 percent and sitting near zero through the low-inflation 2010s.

The relationship is not perfect, because the Fed also weighs employment and financial stability, but inflation is the single biggest driver. When prices run hot, the primary credit rate follows them up, and when they fall, it follows them down. The 2022 episode was the clearest test of the relationship in decades, as the fastest inflation in forty years met the fastest tightening in forty years, dragging the primary credit rate from near zero to above 5 percent in the space of about eighteen months. That tight coupling of inflation and the policy rate is exactly what central banking is designed to deliver, and the 2022 to 2023 episode showed the mechanism working at full stretch, with the primary credit rate rising almost as fast as prices themselves.

What Are the Highest and Lowest Primary Credit Rates?

The highest primary credit rate on record is 6.25 percent, reached in 2006, and the lowest is 0.25 percent, set in March 2020. Between those extremes lie the other turning points that define the history of the rate. The distance between the 6.25 percent high of 2006 and the 0.25 percent low of 2020 is six full percentage points, a span that captures the enormous range the rate has covered in just over two decades of monetary history. Each of these milestone levels was set in response to a specific economic moment, so the numbers are not arbitrary points on a chart but deliberate policy choices made at turning points in the United States business cycle.

Key milestones include the launch at 2.25 percent in January 2003, the crisis low of 0.50 percent in 2008, the 2023 peak of 5.50 percent and the current level of 3.75 percent, markers our leading financial centres coverage helps place in a global setting.

Highs, lows and turning points: from the 2.25 percent launch in 2003 to the 6.25 percent peak in 2006, the 0.25 percent low in 2020 and the 5.50 percent peak in 2023.

Each milestone marks a moment when the United States economy shifted gears, from boom to bust, from crisis to recovery, and from cheap money to costly money. The primary credit rate is a clean record of every one of those turns. Reading the milestones in sequence is like reading a timeline of the United States economy itself, with each turning point in the rate corresponding to a recession, a recovery, a crisis or an inflation scare that reshaped the financial landscape.

The Primary Credit Rate Since 2019

Since 2019 the primary credit rate has made its most dramatic moves yet, swinging from 2.25 percent down to 0.25 percent in 2020, up to 5.50 percent by 2023, and back down to 3.75 percent by 2026. It is the sharpest round trip in the history of the rate. The speed of the recent swings sets them apart, because where earlier cycles unfolded gradually over several years, the moves since 2019 compressed a full boom-and-bust rate cycle into barely six years, testing borrowers and banks alike. The years since 2019 contain both the record low of 0.25 percent and one of the highest readings of the modern era at 5.50 percent, which means the most extreme values of the entire 2003 to 2026 history sit within a single short span.

The pandemic cut, the inflation-driven surge and the careful descent since have all played out in barely six years, a compression of the normal rate cycle that reshaped borrowing costs, a shift our largest asset managers coverage reflects.

The sharpest round trip: since 2019 the rate has fallen to 0.25 percent, surged to 5.50 percent and eased to 3.75 percent, compressing a full cycle into about six years.

The recent path shows how quickly conditions can change. A rate that had been frozen near zero for years more than doubled and then doubled again within two years, before easing back as inflation slowly came under control. The lesson of the recent period is that rates can move far faster than many expect, and that long stretches of stability can give way to violent swings once inflation or financial stress forces the Federal Reserve to act with unusual speed.

The Primary Credit Rate in Numbers

A few numbers capture the history. The primary credit rate launched in 2003, peaked at 6.25 percent in 2006, bottomed at 0.25 percent in 2020, surged to 5.50 percent in 2023, and sits at 3.75 percent in 2026, with its spread to the federal funds rate now zero. These figures together make the primary credit rate one of the cleanest single measures of the stance of United States monetary policy, rising and falling in near lockstep with the federal funds rate that anchors the whole financial system. Viewed as a whole, the twenty-four-year record is a reminder that interest rates are never static, and that the cost of money in the United States has swung through an enormous range as the Federal Reserve has fought booms, busts, crises and inflation in turn.

The rate touches the whole financial system because it sets the price of emergency borrowing for banks, which in turn shapes the cost of credit for everyone else and the flow of money into riskier assets, a link our crypto market coverage explores.

Together these figures show a rate that has been both a quiet backstop and a front-line crisis tool, moving from the housing boom through the zero-rate decade to the inflation shock and the cautious normalisation that followed.

Primary Credit Rate: The Big Picture

Taken together, the primary credit rate from 2003 to 2026 is a compact history of United States monetary policy, from the mid-2000s peak through the financial crisis, the long zero-rate decade and the inflation shock of the 2020s, much of it managed alongside the firms in our asset management coverage.

Whether the rate settles near its current level or moves again depends on inflation and the health of the banking system, but its job is unchanged, standing ready as the price of last-resort borrowing for banks and a quiet anchor for the funds in our largest ETFs and Vanguard assets overviews.

Frequently Asked Questions: The Primary Credit Rate