June Financial Newsletter

A closer look at the Federal Funds Rate

Understanding the Federal Funds Rate

“The Fed is meeting to discuss interest rates” is a phrase that is used frequently in the media, typically surrounded by heated discussion of what effects the decision will have. But what exactly is this rate, how is it determined and what does it mean for the economy?

About the Federal Funds Rate

The Federal Funds Rate is set by the Federal Open Market Committee of the Federal Reserve (the FOMC) based on recent economic activity. The FOMC decides how much interest a depository (such as a bank, credit union, or other institution that holds tradable securities) charges on an overnight loan to another depository.

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