Federal funds rate: interest rate for overnight loans between banks
Federal funds rate
Federal funds rate: interest rate for overnight loans between banks
The federal funds target range is set by the Federal Open Market Committee (FOMC), which meets eight times a year. The FOMC can also hold additional meetings to adjust the target rate. The FOMC's decisions impact the federal funds rate and monetary policy.
Example
A bank with excess reserves lends $1 million to another bank overnight at the federal funds rate.
Remember this
Understanding the federal funds rate helps grasp how monetary policy influences economic conditions and interest rates.
Text adapted from Wikipedia, licensed under CC BY-SA 4.0.
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Educational content, not financial advice.
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