📈  Chart of the Week 9/7/2025

By Michael Allison, CFA

Interest Rates - Some Historical Perspective

This week’s Chart shows the Fed Funds rate over most of the post-WWII period and provides some useful historical context to the current interest rate discussion.

This past week, we had yet another weak employment report and the unemployment rate is now at a four year high. In my opinion, this leaves the Federal Reserve with no excuse to not resume lowering short term interest rates.

A couple of things stand out to me from this week’s Chart.

First, although the rate tightening cycle of 2022 was very rapid, the ultimate rate level doesn’t seem terribly demanding by historical standards. In my view, after a decade and a half post the Great Financial Crisis, with near zero short term rates, investors had been lulled into a sense of that being the norm. Over the course of time, we can see that this period has been anything but normal.

The other takeaway from the Chart I find worth pointing out is that every rate easing cycle, at least in the years depicted, has been associated with a recession, some deeper and longer than others, but recession nonetheless.

Will we have a recession in 2026? I have no idea. 🤷🏼‍♂️

But, I will say this. There are elements of the economy today that make it very different from the past:

• Demographics and an aging workforce,

• AI-driven productivity AND job loss,

• Very high levels of government debt and entitlement obligations, and

• Lower labor intensity in many industries.

How this all nets out, in terms of economic growth in the next few years, is the debate that investors will be having amongst themselves.

I don’t have the answers, but I’m trying hard to think of the right questions to ask.

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