Fed Funds Rate

In the United States, the federal funds rate is the interest rate at which private depository institutions (mostly banks) lend balances (federal funds) at the Federal Reserve to other depository institutions, usually overnight.

The Federal Reserve sets targets for the Fed funds rate and use open market operations to influence it. By doing so, it influences the supply of money in the US. When the media reports the Federal Reserve lowered interest rates by 0.5%, they are referring to the Fed funds rate.