Federal Funds Rate

The Federal Funds Rate is the interest rate at which banks lend reserve balances to each other overnight. It influences overall borrowing costs in the economy, including rates for mortgages, loans, and savings. When the Federal Reserve adjusts this rate, it helps manage inflation, promote economic growth, and stabilize prices. A lower rate encourages borrowing and spending, boosting economic activity, while a higher rate makes borrowing more expensive, helping to cool down inflation or an overheated economy. It is a key tool used by the Fed to influence the country’s economic health.