ECONOMICS
MONETARY POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The interest rate that banks use to lend to each other overnight
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The rate that affects what fees banks charge consumers
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Either A or B
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None of the above
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Detailed explanation-1: -The federal funds rate is the target interest rate set by the FOMC. This is the rate at which commercial banks borrow and lend their excess reserves to each other overnight. The FOMC sets a target federal funds rate eight times a year, based on prevailing economic conditions.
Detailed explanation-2: -Overnight Federal Funds Rate is at 4.57%, compared to 4.57% the previous market day and 0.08% last year. This is lower than the long term average of 4.60%.
Detailed explanation-3: -When the Fed wants to increase the federal funds rate, it does the reverse open-market operation of selling government securities to the banks. The federal funds rate is the major tool that the Fed uses to conduct monetary policy in the United States.
Detailed explanation-4: -The target federal funds rate, which is set by the Fed, serves as the basis for the prime rate. The federal funds rate is the interest rate commercial banks charge each other for overnight lending.
Detailed explanation-5: -What is the current federal reserve interest rate? The current Federal Reserve interest rate, or federal funds rate, is 4.50% to 4.75% as of Feb. 2, 2023.