Investopedia

Continue to Site »

Federal Funds

Filed Under » , , , ,
Dictionary Says

Definition of 'Federal Funds'

Excess reserves that commercial banks deposit at regional Federal Reserve banks. Federal funds can then be lent to other commercial banks with insufficient reserves. These loans are made at a relatively low interest rate, called the federal funds rate or overnight rate, and they typically have an extremely short duration: overnight. Federal funds help commercial banks meet their daily reserve requirements. Banks are required to maintain a certain level of reserves based on the amount of customer deposits they are responsible for.
Investopedia Says

Investopedia explains 'Federal Funds'

When federal funds are freely available for borrowing, credit is easy to obtain and the credit market is considered healthy. When federal funds are difficult to obtain, credit becomes tight. If credit is too freely available, the Federal Reserve may buy back some of the government bonds it has issued to decrease the money supply and try to prevent inflation. The federal funds rate is closely related to short-term interest rates in the broader market.

Articles Of Interest

  1.

    Basics Of Federal Bond Issues

    Treasuries are considered the safest investments, but they should still be analyzed when issued.

  2. Interest Rates And Your Bond Investments

    By understanding the factors that influence interest rates, you can learn to anticipate their movement and profit from it.

  3. What does a cut in interest rates mean for the stock market?

    When the next Federal Reserve meeting is expected to bring interest rate cuts or increases, it is wise, as a stock investor, to be aware of the potential effects behind such decisions. Although ...

  4. The Federal Reserve

    Few organizations can move the market like the Federal Reserve. As an investor, it's important to understand exactly what the Fed does and how it influences the economy.

  5. Why The Consumer Price Index Is Controversial

    Find out why economists are torn about how to calculate inflation.

  6. Predict Inflation With The Producer Price Index

    Find out how the PPI can be used to gauge the overall health of the economy.

  7. Financial Career Options For Professionals

    Find out if spreading your wings to try a new career will make you soar or fall flat.

  8. Leading Economic Indicators Predict Market Trends

    Leading indicators help investors to predict and react to where the market is headed.

  9. Lessons Learned From the Banking Crisis

    There are lessons to be learned on how to handle severe financial downturns, and while the Fed is learning, politicians may not be.

  10. Austerity: When The Government Tightens Its Belt

    When a government tightens its belt in tough economic times the entire nation feels the squeeze.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.

  2. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  3. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.

  4. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

  5. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.

  6. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.
Trading Center
Array ( )
taggroups(for debug only):
Array ( [0] => What's New [1] => Personal Finance [2] => SEG (Business Owners) [3] => SEG (Business Owners:Loan-Business) [4] => Economy And Economics [5] => Markets [6] => Banking [8] => Economics [11] => Bonds And Fixed Income [12] => Investing [13] => SEG (Investors) ) time:9ms