Question of the week
Fed Funds (Federal Funds) are loans that US banks make to each other to meet the reserve balance requirements set by the Federal Reserve. These loans are primarily made on an overnight basis (24-hour term). Banks with excess reserves lend them to those with cash deficits. The borrowed funds are placed with the Federal Reserve in order to meet each bank’s daily reserve needs. The daily interest rate charged in this market is called the fed funds rate.
The opinion expressed above is dated 17 September 2020, and liable to change.
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