Federal funds


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Federal funds

Noninterest-bearing deposits held in reserve for depository institutions at their district Federal Reserve Bank. Also, excess reserves lent by banks to each other.

Federal Funds

Money that a commercial bank in the United States has in excess of its reserve requirement. Banks deposit their federal funds at the Federal Reserve Bank of their district. Federal funds are available for lending to other banks on an overnight basis. The amount of federal funds is seen as a signal of the state of American credit markets, with more money available signaling loose credit and a less indicating the opposite. See also: Federal Funds Rate.

federal funds

Reserve balances that are maintained by commercial banks in the Federal Reserve System at amounts above what is required. These excess reserves are available for lending to other banks in need of reserves. Although the loans are usually made on a single-day basis, they may be renewed. The availability of and the rate paid for federal funds are important indicators of Federal Reserve policy; hence, both are watched closely by financial analysts in order to forecast changes in the credit markets. Also called fed funds.

Federal funds.

When banks have more cash than they're required to in their reserve accounts, they can deposit the money in a Federal Reserve bank or lend it to another bank overnight.

That money is called federal funds, and the interest rate at which the banks lend to each other is called the federal funds rate.

The term also describes money the Federal Reserve uses to buy government securities when it wants to take money out of circulation. It might do this to tighten the money supply in the hope of forestalling an increase in inflation.

References in periodicals archive ?
The Taylor rule views the federal funds rate as reacting to a weighted average of inflation, target inflation, and economic growth.
The Chicago Board of Trade (CBOT) began offering federal funds futures contracts in October 1988 (CBOT, 1992).
For the first time since the start of a national highway program in the United States, federal funds may be applied to a broad range of toll projects at the state and local level, including:
What's occurring at Park Center and Battle Creek is symptomatic of the larger tragedy that has befallen the nation's mentally ill: While federal funds are being used to support private care for the worried well, those with serious mental illnesses are finding it increasingly difficult to get proper psychiatric care at the CMHCs obligated to serve them.
The auditor of a major recipient of federal funds with hundreds of different grants will have to rely on his own judgment in selecting the requirements that are likely to be material to those major programs.
Eurodollar futures, often used to gauge long-term policy expectations, reveal a similar pattern: While longer-term expectations have declined since the beginning of the latest round of federal funds rate increases, they have recently stabilized.
This report responds to a Congressional request that we provide information on expenditures of federal funds by several organizations and their affiliates--the Planned Parenthood Federation of America, the Population Council, the International Planned Parenthood Federation, The Alan Guttmacher Institute, Advocates for Youth, and the Sexuality Information and Education Council of the United States (SIECUS)--all of which are involved in health-related activities.
The Federal Open Market Committee decided on November 6, 2002, to lower its target for the federal funds rate by 50 basis points to 1 1/4 percent.
The provinces agreed to match the federal funds, although the Quebec City deal gives them wiggle room to get credit for spending by third parties.
In fairly short order, Beame convinced members of the New York congressional delegation to push legislation allowing him to "borrow' federal capital funds and use them to offset the Transit Authority's operating deficit (and to hold the fare) as long as the city promised to spend its own funds to replace the federal funds.
Malaga was able to increase its earnings, despite 11 increases in the Federal Funds rate, by continuing to grow while maintaining a relatively constant level of operating expenses.
It's bad enough that the country consistently shortchanges needy California when it doles out federal funds, as it does once again in this particular bill.

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