Federal Funds Rate
The overnight interbank lending rate targeted by the Fed.
What is Federal Funds Rate?
The Federal Open Market Committee sets a target range, and it propagates into savings rates, mortgage pricing, corporate borrowing costs, and equity valuations. The primary lever of US monetary policy.
Federal Funds Rate: a worked example
Raising the target range from 0.25% to 5.25% between 2022 and 2023 repriced nearly every asset class.
More terms in Macro & Markets
Inflation
A general rise in prices that erodes purchasing power.
Real vs. Nominal Return
Return after inflation versus the headline number.
Monetary vs. Fiscal Policy
Central bank rate and money supply tools versus government tax and spending.
Yield Curve
A plot of Treasury yields across maturities.
Yield Curve Inversion
Short-term yields exceeding long-term yields - a recession signal.
Recession
A significant, broad, sustained decline in economic activity.
Quantitative Easing
Central bank purchases of long-dated assets to push down long rates.
Gross Domestic Product (GDP)
The total value of goods and services produced in an economy.