The federal funds rate is the target interest rate range set by the US Federal Reserve's Federal Open Market Committee at which commercial banks lend their excess reserve balances to one another overnight, and it is the primary tool through which the Federal Reserve conducts monetary policy, influencing borrowing costs throughout the broader economy from mortgage and credit card rates to corporate lending. Set at scheduled FOMC meetings roughly eight times a year since the modern federal funds rate target framework took shape in the 1980s and 1990s, changes in the rate, raised to cool an overheating or inflationary economy and lowered to stimulate a slowing one, are among the most closely watched decisions in global financial markets.
Facts
Geography
Geographic ScopeUnited States (Federal Reserve) 2 Classification
Release FrequencySourced to the subject's own account In the Other Atlases
Sources
1. Federal funds rate (Wikipedia)
WikipediaWikipedia, "Federal funds rate", lead section
The federal funds rate is the interest rate at which depository institutions lend reserve balances to other depository institutions overnight on an uncollateralized basis. Reserve balances are amounts held at the Federal Reserve. Institutions with surplus balances in their accounts lend those balances to institutions in need of larger balances. The federal funds rate is an important benchmark in financial markets and central to the conduct of monetary policy in the United States as it influences a wide range of market interest rates.
Introduction, frequency
It is published daily by the Federal Reserve Bank of New York.
View the Source 2. Board of Governors of the Federal Reserve System
Frequently Asked Questions
Who sets the federal funds rate, and how often does it change?
The Federal Open Market Committee sets a target range at scheduled meetings roughly eight times a year, about seven weeks apart.
The federal funds rate is not administratively fixed the way a central bank price control would be; it is the rate banks actually charge each other overnight to lend reserve balances, and it settles wherever supply and demand for those reserves clear on a given day. The Federal Reserve steers that market rate by setting a target range, decided by the Federal Open Market Committee (FOMC) at meetings that normally occur eight times a year, about seven weeks apart, though the committee can also meet or act between scheduled meetings if conditions require it. Between meetings, the Fed uses tools such as the interest paid on reserve balances and overnight reverse repurchase operations to keep the actual traded rate, the effective federal funds rate, inside the target range the FOMC most recently set.
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