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Federal Funds Rate

Market & Macro

The federal funds rate is the interest rate at which depository institutions lend reserve balances to one another overnight. The Federal Open Market Committee does not set this rate directly. It sets a target range, and steers the market rate into that range primarily through the interest it pays on reserve balances and through its overnight reverse repurchase facility. The published effective federal funds rate is a volume-weighted median of the overnight transactions that actually occurred.

The Fed Funds Rate is the most important single number in financial markets — it sets the cost of borrowing across the entire economy and directly affects stock valuations, especially high-growth names.

Further reading: Wikipedia

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