Federal funds rate

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The Federal funds rate is the rate set by the Federal Reserve Board that has a strong correlation (direct most of the time) with the prime rate. It is a lending rate for banks of balances at the Federal Generally lent to other banks. The difference between the federal funds rate and the prime rate is 3 percentage points.

It is the way the Federal Reserve sets monetary policy and attempts to keep inflation down while also attempting to avoid recessions.

External Links

Changes to the federal funds rate since 1990