🎯 In 30 seconds: The Federal Reserve sets a target range for one overnight rate. Short-term rates (T-bills, savings, prime-based credit cards) move with it, often within days or weeks. CDs move with what markets expect. Fixed mortgage rates follow longer-term market rates such as the 10-year Treasury, so they can rise even when the Fed cuts.
What the Fed actually sets
The Federal Open Market Committee (FOMC) sets a target range for the federal funds rate, the rate banks charge each other for overnight loans. Changes are announced in basis points: 25 basis points is one quarter of a percentage point. The Fed’s open market operations page lists every change with its date and the new range.
The Fed does not set your savings rate, your card APR or your mortgage rate. Banks and markets set those, with the Fed’s target as one big input.
How a change flows through
| Product | What it mostly tracks | How fast |
|---|---|---|
| T-bills | Where traders expect the fed funds rate to be over the bill’s life | Often moves before the meeting, as expectations shift |
| Savings and money market accounts | The bank’s own decision, nudged by the Fed | Usually within weeks; some banks move slowly |
| New CDs | Expected rates over the CD’s term | Often ahead of the Fed; existing CDs stay locked |
| Prime rate | Set by each bank, commonly based partly on the fed funds target | Usually right after a Fed change |
| Variable credit card APRs, HELOCs | Prime rate plus a margin | Usually within a billing cycle or two, per your agreement |
| Fixed mortgages | Longer-term rates such as the 10-year Treasury | Daily with the bond market; may ignore the Fed |
That last row surprises people. A mortgage lasts years, so lenders price it off long-term market rates, which reflect expectations for inflation and growth over many years, not tonight’s overnight rate.
Worked example: a quarter-point cut
Suppose the Fed lowers its target by 0.25 percentage point and every variable rate follows one-for-one:
- $20,000 in savings earns about $50 less per year.
- A $6,000 credit card balance on a prime-based APR costs about $15 less per year.
- A fixed-rate mortgage you already have: no change.
- A CD you already opened: no change until it matures.
One cut moves small dollars. A series of cuts over a year or two is what changes the picture, which is why people with a set date for their money often lock part of it in a CD or Treasury.
Reading the FOMC calendar and statement
The Fed posts its meeting dates a year ahead on the FOMC calendar page. For 2026 it lists eight scheduled meetings, each over two days. The decision and statement come out on the last day. Four of the 2026 meetings (March, June, September and December) also include a Summary of Economic Projections. Minutes follow about three weeks after each decision.
When you read a statement:
- Find the sentence with the target range. Compare it with the range on the open market operations page.
- Check the vote. Dissents show disagreement inside the committee.
- Compare the wording with the previous statement. Changed phrases about inflation or jobs are what markets react to.
- At projection meetings, look at where members expect the rate to be at year-end.