--- type: deep-research topic: FRED short-rate policy series methodology series: [FEDFUNDS, DFEDTARU, DFEDTARL, SOFR] created: 2026-07-13 session: pre-block teaching reference (not a study block) --- # FRED Short-Rate Policy Series — Methodology ## 1. FEDFUNDS — Federal Funds Effective Rate **Definition:** Volume-weighted average of overnight unsecured loans of federal funds (reserves held at Federal Reserve Banks) between depository institutions. A bilateral *market* rate. **Source / release:** Board of Governors, published in the **H.15 Selected Interest Rates** release. **FRED frequency:** Monthly, Not Seasonally Adjusted. Underlying data is daily; FRED also serves daily NSA. **Mechanism (how the Fed steers it):** The Fed does NOT set the effective fed funds rate directly. The Fed sets the *target range* (DFEDTARU / DFEDTARL) and influences where the effective rate prints by setting administered rates: - **IORB** (Interest on Reserve Balances) — floor. Banks will not lend in the fed funds market below IORB. - **ON-RRP** (Overnight Reverse Repo) — *effective* floor when reserves are abundant (post-2019 regime). - **Discount window primary credit rate** — ceiling. In the modern ample-reserves regime, the EFFR spread to IORB is normally 1–3 bp. Treat the effective rate as essentially administered via IORB, not a true bilateral-market price. **Read carefully:** Don't read EFFR as a clean supply/demand signal of reserve scarcity. The reserve-scarcity signal lives in: - EFFR minus IORB - SOFR minus IORB - SOFR Index and 30-day averages - Quarter-end / month-end repo spikes (SOFR moves, EFFR often doesn't) **Pre-2008 vs post-2008:** The H.15 series is continuous back to 1954. The series in the FRED "Other Formats" dropdown (Annual, Biweekly, Daily, Weekly) all refer to the same concept at different aggregations. --- ## 2. DFEDTARU — Federal Funds Target Range — Upper Limit **Definition:** The *upper bound* of the FOMC's administered target range. Set at FOMC meetings. Not a market rate — a step function. **Source / release:** Board of Governors, **FOMC Press Release** (updated on FOMC decision days). **FRED frequency:** Daily, 7-Day, NSA. Updates intraday on FOMC days; flat on non-meeting days. **Mechanics:** The DFEDTARU/DFEDTARL pair defines the policy corridor. Step-changes are FOMC decisions. Between meetings the series is the official policy stance. **Important distinction:** The *target range* is the policy signal. The *operational corridor* that actually pins the market is a different set of administered rates: - Floor: IORB (or ON-RRP when reserves are abundant) - Ceiling: Discount window primary credit rate Watch for the convention in market commentary: "Fed funds target" is almost always the *midpoint* of DFEDTARU/DFEDTARL (e.g., 3.625% = midpoint of 3.50–3.75). --- ## 3. DFEDTARL — Federal Funds Target Range — Lower Limit **Definition:** The *lower bound* of the FOMC's administered target range. Set jointly with DFEDTARU. **Mechanics:** DFEDTARU and DFEDTARL always move by the same amount (typically 25 bp in modern cycles, occasionally 50 or 75 bp). The "width" of the corridor has been 25 bp since the range system was introduced. **Pre-Dec-2008:** No range. The legacy series is **Federal Funds Target Rate (DFEDTAR)** — discontinued. FRED will stitch the legacy target rate into the lower bound of the range for historical continuity. --- ## 4. SOFR — Secured Overnight Financing Rate **Definition:** Volume-weighted *median* of transaction-level triparty repo data — the cost of overnight cash against US Treasury collateral. Published by the NY Fed. **Source / release:** Federal Reserve Bank of New York, **Secured Overnight Financing Rate Data** release. **FRED frequency:** Daily, NSA. **Why secured matters:** - SOFR is collateralized by Treasuries — essentially risk-free from a credit standpoint. - Structurally different from Fed Funds (unsecured bank-to-bank). - Replaced USD-LIBOR as the dominant US dollar overnight benchmark after LIBOR cessation in mid-2023. **Relationship to the Fed's administered corridor:** - *Abundant reserves* regime: SOFR prints near IORB (the floor). SOFR minus IORB is the cleanest real-time signal of repo-market tightness. - *Scarce reserves* regime: SOFR can trade up toward the upper end of the corridor. SOFR spikes on month-end, quarter-end, and Treasury settlement dates are diagnostic of reserve scarcity / balance-sheet stress. **Three structural points:** 1. **Transaction-based, not quote-based.** Harder to manipulate than LIBOR was, but has its own quirks (reporting thresholds, volume weighting, the "triparty" perimeter). 2. **Multiple related series on FRED:** SOFR (daily), 30-Day Average SOFR, 90-Day Average SOFR, SOFR Index. The daily print is the most reactive; the 30-day average is the floating-rate benchmark for loans and some derivatives. 3. **CME SOFR futures** (1-month and 3-month) are the modern equivalent of Eurodollar futures for the US rates curve. Fed funds futures (FF) still trade but are increasingly secondary to SOFR futures for short-rate pricing. --- ## 5. How the four series fit together | Series | Type | Set by | Function | |---|---|---|---| | DFEDTARU/L | Step function | FOMC | Policy *signal* | | FEDFUNDS (EFFR) | Market rate (administered via IORB) | Bilateral bank trades | Policy *implementation*, unsecured | | SOFR | Market rate, transaction-based | Bilateral repo trades | Policy *implementation*, secured; dominant short-rate benchmark | | IORB (separate series) | Administered | Fed | Operational *floor* | **Daily watch-list order (rates desk convention):** 1. IORB (the floor the Fed is enforcing) 2. SOFR (the secured market reading; most reactive) 3. EFFR / FEDFUNDS (the unsecured reading; usually close to IORB) 4. DFEDTARU/DFEDTARL (the policy level — for context only) **Spreads carry the signal; levels don't.** - SOFR minus IORB → repo-market tightness / collateral scarcity - EFFR minus IORB → fed funds market functioning - SOFR minus EFFR → secured vs unsecured basis (usually small; widens at quarter-end and during stress) - SOFR minus ON-RRP → depth of the "reverse repo bucket" (when abundant reserves regime is "draining" through ON-RRP rather than the fed funds market) --- ## 6. Quick reference - FRED page for the series notes (read these on FRED — the actual notes are richer than this summary): - https://fred.stlouisfed.org/series/FEDFUNDS - https://fred.stlouisfed.org/series/DFEDTARU - https://fred.stlouisfed.org/series/DFEDTARL - https://fred.stlouisfed.org/series/SOFR - H.15 release: full daily yield table including the IORB and ON-RRP rates. https://www.federalreserve.gov/releases/h15/ - NY Fed SOFR: https://www.newyorkfed.org/markets/reference-rates/sofr - FRED Blog "Constructing forward interest rates in FRED" (linked from the DFEDTARU page) — for the futures-implied forward curve methodology. --- ## 7. As-of read (2026-07-12 / 2026-07-13) - DFEDTARU: 3.75% | DFEDTARL: 3.50% | target range 3.50–3.75%, midpoint 3.625% - FEDFUNDS (Jun 2026 monthly): 3.63% — i.e. the effective rate is printing close to the midpoint, slightly above IORB implies, consistent with mild balance-sheet pressure - SOFR (2026-07-09): 3.53% — inside the range, ~12bp above the prior day; watch whether this is end-of-week / month-end drift or a regime shift - IORB (separate FRED series, not pulled here): typically 10–15 bp below the upper limit of the range. Verify on the H.15 page. Reads are 1-day-old at session open. For live trade work, refresh against H.15 same morning.