Description
The U.S. Federal Funds Target Rate is set by the Federal Open Market Committee (FOMC) during its meetings and represents the target interest rate range. The Effective Federal Funds Rate is the overnight borrowing rate between banks and serves as a benchmark for short-term interest rates in the market. This rate significantly impacts US economic activity, inflation, and employment. When the economy overheats or inflationary pressures rise, the Federal Reserve typically raises rates to curb demand; conversely, when the economy slows or inflation is too low, it lowers rates to stimulate economic growth.
The FOMC meets eight times a year to determine interest rate policies based on economic data and forecasts.