Overview

Federal funds rate


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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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