FEDERAL FUNDS RATE: The interest rate that banks charge each other when loaning bank reserves through the federal funds market. This is a key interest rate in the economy because helps to determine banks' minimum cost of getting funds. If the federal funds rate is higher, then banks are likely to raise the interest rates they charge, like the prime rate, home mortgage rate, or rate on car loans. See also | federal funds | federal funds market | interest rate | bank reserves | excess reserves | Federal Reserve System | money supply | monetary policy | open market operations | reserve requirements | discount rate | bank | money creation | Federal Reserve deposits |
