Federal funds rate

Quick Reference

The highly volatile and sensitive interest rate charged between member banks of the Federal Reserve System. As the overnight rate paid on Federal funds, it is a key indicator of money-market interest rates. Every transaction can alter the level at which the rate is fixed. In practice the Federal Open Market Committee sets a target rate as part of its monetary policy, which is then enforced through open-market operation.

Subjects: Financial Institutions and Services.

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