Federal Funds Rate

The Fed Funds Rate refers to the Interest Rate suggested by the FMOC at the Federal Reserve Bank. Adjustments to the suggested Rate are a key instrument of Monetary Policy in the U.S.

The policymaking body of the Federal Reserve System at the Federal Reserve Bank is the FMOC or Federal Open Market Committee. The Federal Funds Rate is Rate is a suggested Rate by the FOMC. The Fed Funds Rate is a key instrument used to adjust Monetary Policy, in the U.S. The key is that the actual Fed Funds Rate is determined in the Overnight Lending Market, thus set by the supply and demand for reserves by member Banks, the U.S. Commercial Banks. This rate is directly related to the pricing of many banking products, credit cards. This is not a Credit Facility offered by the Fed. Thus, the Interest Rate is set by the market, not the FMOC. The Federal Reserve makes available a short-term credit facility to member banks, which is called the Discount Window, and the Interest Rate is called the Discount Rate.