Fed Funds Rate

The interest rate at which banks lend money to each other, usually on an overnight basis. The law requires banks to keep a certain percentage of their customer's money on reserve, where the banks earn no interest on it.

Please find the current federal funds index rate in the lower part of the rate box (right).

The federal funds rate is used to control the supply of available funds, inflation and other interest rates. Raising the rate makes it more expensive to borrow. That lowers the supply of available money, which increases the short-term interest rates and helps keep inflation in check. Lowering the rate has the opposite effect, bringing short-term interest rates down.

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