• 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.
  • The federal funds rate can affect short-term consumer and credit card rates.
  • Investors are also watching the federal funds rate as it affects the stock market.