The interest rate at which banks lend to each other overnight; set by the Federal Reserve.
The federal funds rate is the interest rate that commercial banks charge each other for overnight loans of reserve balances. The Federal Reserve doesn't set the rate directly but targets a range (typically 0.25% to 0.5% wide) through open market operations. This rate is fundamental: it influences all other interest rates in the economy, including mortgages, auto loans, credit cards, and savings accounts. When the Fed raises the federal funds rate, banks pass increases along to borrowers; when the Fed cuts the rate, borrowing becomes cheaper. The Fed adjusts rates to control inflation and manage economic growth. Monitoring the Fed's actions is important for understanding broader economic trends and anticipating changes to interest rates you pay or earn.