Fed Funds Rate

The fed funds rate is the interest rate the Federal Reserve targets for overnight loans between banks, and it is the primary lever the Fed uses to tighten or loosen financial conditions across the whole economy. The Fed sets a target range, not a single number, and adjusts it at scheduled policy meetings roughly eight times a year.

Changes ripple outward: the prime rate banks charge their best customers tracks it closely, and everything from credit card rates to mortgage rates to corporate borrowing costs adjusts in its wake, with a lag. A quarter-point move sounds small but reshapes the return available on cash relative to riskier assets like stocks.