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 ?
Schenk predicted that subsequent increases of 25 basis points will be announced during the FOMC meetings in September, October and November, for a total Fed fund rate increase of 1% by year-end 2015.
One, the Chicago IMM Eurodollar and Fed Fund futures markets now contradicts the Fed Chairman's pledge because it implies a Fed Funds rate of 0.
While still at historically low levels, the Fed Fund rate increase marks a new cycle of rising borrowing costs across both consumer and commercial sectors.
Now that the Fed rate is dropped to historic lows, there is not much else the Fed can do by lowering the Fed fund rate to affect the economy.
One way of measuring the market's expectations about changes in FOMC policy is to examine Eurodollar and fed fund futures.
On the other hand, the massive sell-off in Treasuries also led fed fund futures to shift to only price in a 28 percent chance of a 25bp cut by the Federal Reserve on October 29, compared to 82 percent on Thursday.
To the extent that the fed funds future market embodies these expectations, the fed funds futures rate may systematically overestimate the future fed funds rates when fed fund rates are falling and, by symmetry, underestimate the future fed funds rate when fed funds rates are rising.
The Fed Fund's rate is the overnight rate of interest at which Fed Funds are traded among financial institutions.
The dollar's strength may only be able to last so long, though, as fed fund futures shifted today to price in a mild 10 percent chance of a 25bp rate cut on September 16.
He said, 'Given my current outlook, I believe that it would be appropriate to wait until 2017 to initiate lift off and then raise the fed funds rate at about 2 percentage points per year.
Now with a self-sustaining expansion, the FOMC began rolling back its asset purchases program and, at some point in the future, it will start increasing its target for the fed funds rate.
After today s decision by the Federal Reserve to maintain the target Fed funds rate at zero to 25 basis points, Swiss Re s Chief Economist, Kurt Karl believes that with strong growth in the US economy virtually assured for the rest of the year, the Fed's forward guidance will at first become neutral and then begin hinting about a future tightening.