The federal funds rate is the interest rate banks charge each other for overnight loans to meet reserve requirements.
If a bank can’t meet its reserve requirements, it can borrow money from the Federal Reserve or from other banks that hold funds at the Fed.
If a bank has deposits of $100,000,000, the bank’s overnight reserve requirement would be roughly $10,000,000
One of the most significant rates influenced by the fed funds rate is the prime rate the prevailing rate banks charge their best customers.
The prime rate affects many consumer interest rates, including rates on Deposits,
Credit cards, and