Federal Funds Rate
The federal funds rate is the US benchmark interest rate set by the Fed, and the anchor for dollar pricing across all maturities.
The federal funds rate is the US benchmark interest rate the Fed sets, anchoring borrowing costs across the economy. Higher rates attract capital and tend to strengthen the dollar.
The federal funds rate is the interest rate at which US banks lend reserves to each other overnight, and the benchmark rate the Federal Reserve targets through its policy decisions. It is the anchor for US borrowing costs across the economy, from mortgages to corporate debt, and the starting point for the interest-rate differentials that drive currency flows. When the Fed raises it, the dollar tends to strengthen; when it cuts, the dollar tends to weaken.
How It Works
- Set by the FOMC as a target range, currently expressed as a band like 3.75-4.00%
- Influences every US rate from mortgages to credit cards
- Its gap versus other countries' rates drives currency carry flows
Related Terms
Sources
- Federal ReserveOfficial rate announcements
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