Federal funds rate

Definition

The interest rate that banks charge each other for the use of Federal funds. It changes daily and is a sensitive indicator of general interest rate trends. The Federal funds rate is one of the of two interest rates controlled by the Fed. While the Fed can't directly affect this rate, it effectively controls it in the way it buys and sells Treasuries to banks. This is the rate that reaches individual investors, though the changes usually aren't felt for a period of time.

Use Federal funds rate in a sentence

The bank needed to borrow money from the other bank, so it meant paying the federal funds rate on that transfer.

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The federal funds rate was interesting to watch because it was all about banks charging each other for the use of federal funds.

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The federal funds rate was used during the interbank transfer which allowed for swift transactions and less variables to be concerned about.

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