What is the federal funds rate?
The federal funds rate is the interest rate banks charge each other to borrow money overnight. The Federal Reserve's rate-setting committee, the Federal Open Market Committee, picks a target range for it, and the Federal Reserve steers the actual rate into that range.
It's not a rate you pay yourself. It reaches you through the rates on your own loans and accounts.
Updated
Where you’ll see the word
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A Federal Reserve statement
After each committee meeting, the statement gives the target range for the rate.
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The news
Reporters shorten it to the fed funds rate, or just the Fed rate, and report each decision as a cut, a hike or a hold.
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An adjustable-rate mortgage note
The note names the index your rate resets to and the margin added on top. The federal funds rate isn't that index.
You might see it called
- FFR The abbreviation in Federal Reserve speeches and papers. Federal Reserve
- target range for the federal funds rate What the committee actually sets: a range, not a single number. Federal Reserve
- Effective federal funds rate (EFFR) The rate banks actually paid, calculated and published by the New York Fed. New York Fed
What the federal funds rate means for you
The Federal Reserve says changes in the target range influence short-term interest rates on other financial instruments, which in turn affect what households and businesses spend. A new mortgage is priced in a separate market. A fixed-rate mortgage you already have keeps its rate whatever the Fed does.
Two numbers go by the name. The target range is the committee's decision. The effective rate is what banks actually paid: the Federal Reserve Bank of New York calculates it each day as a volume-weighted median of the overnight trades reported to it, and publishes it the next business morning.
Questions about the federal funds rate
What is the federal funds rate right now?
The current target range is on the Federal Reserve's policy-rate page, and the latest effective rate is on the New York Fed's page. Both are kept current by the Fed itself.
How does the Fed keep the rate in its target range?
Mainly by changing the interest it pays banks on reserve balances and the rate on its overnight reverse repurchase facility, according to the Federal Reserve Board.
Our pages that use it
- Interest rate →The broader price of borrowing money.
- Adjustable-rate mortgage →A home loan whose contract allows the rate to reset.
Related terms
- Interest RateThe cost of borrowing, expressed as a percentage of the principal for a stated period. Household loan rates are priced in their own markets.
- Adjustable-Rate Mortgage (ARM)A mortgage whose interest rate changes on scheduled adjustment dates under the loan agreement.
- InflationA rise in the overall level of prices over time.
- APR (Annual Percentage Rate)The annualized cost of credit, including interest and certain fees, used to compare borrowing offers.
Sources and method
This page uses none of our own data. Its facts come from the Federal Reserve Board's policy-rate page, a Federal Reserve Board speech and the New York Fed's effective-rate page, each opened on Oct 22, 2026.
- Board of Governors of the Federal Reserve System: Economy at a Glance, Policy Rate, at federalreserve.gov
- Federal Reserve Bank of New York · Effective Federal Funds Rate, at newyorkfed.org
- Board of Governors of the Federal Reserve System · Implementation and transmission of monetary policy, at federalreserve.gov
We write with assistance from AI tools. Figures come from the data and sources named on this page.