Visualizing 40 Years of U.S. Interest Rates
In just six months, the Federal Reserve has hiked interest rates by 300 basis points in one of the fastest rate increases in decades. By the end of 2023, rates could rise to 4.50-4.75%.
Yet in spite of these increases, rates still fall below historical averages.
In Part 1 of our Seizing Capital Opportunities series from Citizens, we show interest rate trends over modern history, and the implications of increasingly hawkish monetary policy in today’s environment.
U.S. Interest Rates: Reversing the Trend
For decades, U.S. interest rates have fallen due to structural factors including slower GDP and employment growth.
But with COVID-19, trillions in fiscal stimulus, and Russia’s invasion of Ukraine, demand dynamics have dramatically shifted. U.S. inflation hit 40-year highs, met with a strong labor market. As a result, the Federal Reserve has made aggressive moves to raise rates to prevent the economy from overheating.
Below, we show average annual 10-year Treasury yields, a proxy for U.S. interest rates, and their annual percentage change since 1980. Data is as of October 5, 2022.
| Year | Average U.S. Interest Rate | Annual Percentage Change |
|---|---|---|
| 2022* | 2.7% | 156% |
| 2021 | 1.5% | 63% |
| 2020 | 0.9% | -52% |
| 2019 | 2.1% | -29% |
| 2018 | 2.9% | 12% |
| 2017 | 2.3% | -2% |
| 2016 | 1.8% | 8% |
| 2015 | 2.1% | 5% |
| 2014 | 2.5% | -29% |
| 2013 | 2.4% | (Read more...) |