The fed funds rate ( short for federal funds rate) is the interest rate at which banks lend to each other overnight. This means that the fed funds rate is actually a market interest rate. However, the Fed sets a target for the fed funds rate, and keeps the rate on target via open market operations. For purposes of this site, references to the fed funds rate are actually to the fed funds rate target. Realize that on any given day, the actual rate may differ from the target rate slightly. The fed funds rate target is set by the Federal Open Market Committee, the Federal Reserve's monetary policy committee.

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