What Is the Fed Funds Rate?

The federal funds rate is the target range at which US banks lend reserves to each other overnight. The Federal Open Market Committee (FOMC) sets it at eight scheduled meetings a year to steer inflation and employment.

Why it matters for investors

Raising the rate makes borrowing more expensive and usually cools the economy and stock valuations. Cutting it does the opposite. Markets also watch the Fed's statement and press conference for hints about future moves.

Common questions

How often does the Fed meet?

The FOMC holds eight scheduled meetings a year, roughly every six weeks, and can meet unscheduled in emergencies.

Does the Fed rate affect mortgages?

Indirectly. Mortgage rates follow longer-term Treasury yields, which react to expectations about the Fed's path.