Fed Funds Rate

The federal funds rate is the interest rate banks charge each other for overnight loans of reserve balances held at the Federal Reserve. It is the Fed's primary policy lever: by setting a target range, the FOMC influences short-term borrowing costs throughout the economy.

The effectiverate — shown above — is the volume-weighted median of actual overnight transactions, reported daily by the New York Fed. It typically settles near the midpoint of the FOMC's target range.

Changes in the target range occur only at scheduled FOMC meetings (eight times a year) or, rarely, at unscheduled emergency meetings. Between meetings the range holds steady even as market conditions shift.