What is the 'Federal Funds Rate'?

The federal funds rate refers to the interest rate that banks charge other banks for lending them money from their reserve balances on an overnight basis. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

| Term of the Day Federal Funds Rate The federal funds rate refers to the interest rate that banks charge other banks for lending them money from their reserve balances on an overnight basis. By law, banks must maintain a reserve equal to a certain percentage of their deposits in an account at a Federal Reserve bank. Any money in their reserve that exceeds the required level is available for lending to other banks that might have a shortfall. Read More » Related to "Federal Funds Rate" What Does a Low Federal Funds Rate Mean? A low federal funds rate implies expansionary monetary policy by a government, stimulating demand and employment. Read More » What Are the Differences Between the Federal Funds Rate and LIBOR? The Federal Funds Rate and the London Interbank Offered Rate (LIBOR) are the two most prominently featured interest rates in the U.S. and abroad. Read More » How the Federal Reserve Devises Monetary Policy Learn about the tools the Federal Reserve uses to influence interest rates and economic conditions. Find out the types of action a central bank may take. Read More » Related Definitions Federal Reserve System (FRS) The Federal Reserve System, commonly known as the Fed, is the central bank of the United States, which regulates the U.S. monetary and financial system. Read More » Reserve Requirements Reserve requirements refer to the amount of cash that banks must hold in reserve against deposits made by their customers. Read More » Federal Open Market Committee—FOMC The Federal Open Market Committee (FOMC) is the branch of the Federal Reserve Board that determines the direction of monetary policy. Read More » London Inter-Bank Offered Rate (LIBOR) LIBOR is a benchmark interest rate at which major global banks lend to one another in the international interbank market for short-term loans. Read More » CONNECT WITH INVESTOPEDIA Email sent to: mondemand.forex@blogger.com To update your newsletter preferences or unsubscribe, click here. 114 West 41st St, floor 8 New York NY 10036 © 2019, Investopedia, LLC, All Rights Reserved | Privacy Policy