The Federal funds rate is the rate that banks charge other banks for overnight loans of excess reserves.

Question

Quizplus · Accepted Answer

This statement is true. The Federal funds rate is the interest rate at which depository institutions (banks and credit unions) lend reserve balances to each other overnight on an uncollateralized basis. It is one of the most important interest rates in the U.S. economy, as it influences a wide range of other interest rates, including those for mortgages, auto loans, and credit cards.

The Federal Funds Rate Is the Rate That Banks Charge