Four rates, one job: keep the actual market rate trading inside a range the Fed sets on purpose. Here's what each one does today, and where they've all been for the last two years.
■ DocumentedWhat a bank pays to borrow directly from the Fed as a last resort. Nobody wants to be here — using it signals the bank couldn't find funds anywhere cheaper.
What the Fed pays banks just to hold reserves and do nothing. No bank lends cheaper than this risk-free rate, so raising or lowering it pulls everything else with it.
What banks actually trade at overnight. This is the number in the headlines. It isn't set directly — it's the market settling just under IORB.
Money-market funds and other non-banks can always park cash here overnight, so almost nothing trades below it.
Nobody "sets" the fed funds rate directly. The Fed sets the ceiling, the floor, and the main lever in between — and lets the actual rate find its own level inside that corridor.
Same four rates, over the last two years. The whole corridor has walked down 175 basis points since September 2024 — in two clusters of three cuts each, with long stretches of nothing in between.
Since September 2024: six cuts, 175 basis points total, delivered in two back-to-back clusters of three — one closing out 2024, one closing out 2025 — with about nine quiet months between them and, so far, seven more in 2026.
How this is drawn: the target-range dates and values (5.50–5.25% down to 3.75–3.50%) are the FOMC's own documented decisions. IORB and ON RRP are shown at the Fed's standard operating spread for the current ample-reserves regime — IORB roughly 10bp below the top of the range, ON RRP at the bottom, discount rate at the top — applied consistently across the window; the exact spread has shifted by up to 5bp at individual meetings. EFFR is shown tracking just under IORB, as it has throughout this period.
This is the part the multiplier story gets wrong: it treats these as one mechanism. They're two, at two different levels of the system, and neither waits for the other.
A wholesale-level accounting entry. No cash you or I would ever touch changes hands — it's a credit between the Fed and a bank's account.
This is where the money you actually spend comes from. It happens the moment the loan is approved, not because the bank went looking for spare reserves to lend out.
Put together
The corridor at the top of this page only governs Flow 1 — the wholesale price banks charge each other for reserves. It has no direct grip on Flow 2 — how much banks lend into the real economy — because that decision is limited by bank capital and loan demand, not by how many reserves a bank happens to be sitting on. The Fed can move the price of reserves. It cannot ration the quantity of loans. That's the entire gap between the corridor picture on this page and the old multiplier picture in the textbook, in one sentence.