Definition
The highest level the Fed's target rate reaches in a cycle of rate hikes, or the lowest in a cycle of cuts.
The story
In the 2022 to 2023 hiking cycle, the Fed's target range topped out at 5.25% to 5.50% in July 2023. Before a cycle ends, traders and Fed officials argue about where the terminal rate will land, and that debate moves bond yields.
Why markets watch it
Where rates stop matters as much to markets as how fast they get there.
Connects to
Federal funds rateRate hike and rate cutDot plotNeutral rate
We explain why it moves markets. What you do with it is your call. Commentary and education only. Not financial advice. All terms