Fed Funds Effective Rate

## What this measures

This measures the weighted average interest rate at which depository institutions lend reserve balances to each other overnight in the federal funds market.

## Why it matters

The effective federal funds rate sets the baseline cost of overnight liquidity in the U.S. banking system. It influences short-term borrowing costs across credit markets and signals the stance of monetary policy, affecting decisions about expansion, refinancing and cash management.

## How to read it

A rising rate means overnight money is more expensive, reflecting tighter monetary policy or scarcer liquidity. A falling rate signals easing. Compare this rate to its historical range and to the Federal Reserve's target range to gauge policy direction.

## What it does not say

It does not reveal why individual banks are lending or borrowing, nor does it capture credit conditions beyond the overnight interbank market.

## Source

Board of Governors of the Federal Reserve System, H.15 Selected Interest Rates, effective federal funds rate (FRED series DFF). Palanor pulls it from the FRED API (Federal Reserve Bank of St. Louis) nightly.