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 ?
This Commentary describes the evolution of the federal funds market since the crisis.
While using federal funds to purchase sterile needles or syringes for illegal drug injection is still banned, agencies may be able to use federal funds to purchase HIV testing kits, to support syringe disposal services and provide naloxone to reverse the effects of an opioid overdose, among other services.
From early November there was a steady decline in the federal funds rate from about 20 basis points to 17 basis points.
For many years, the federal funds rate has been the main variable that the Federal Open Market Committee targets when it sets monetary policy.
Categories: June 16, 2010, Budget obligations, Congressional oversight, Data collection, Federal aid programs, Federal funds, Financial management, Financial statement audits, Funds management, Health care services, Independent agencies, Private sector, Use of funds
Although the FOMC first lowered the federal funds target rate in response to the crisis as early as September 2007, that target remained meaningfully above zero until December 2008.
This article uses the method of Carlson, Craig, and Melick (2005) to extract an implied risk-neutral probability density function over possible future federal funds target rates from daily option prices.
The Federal Open Market Committee decided on November 1, 2005, to raise its target for the federal funds rate 25 basis points, to 4 percent.
FOLLOWING THIS WARNING, our discussions turned to monetary policy--the setting of a target for the federal funds rate.
5 billion a year to meet No Child requirements, about twice what the state currently receives in federal funds.
According to the ALA, more than $1 billion in federal funds has been distributed to libraries since 1998 through the education-rate (E-rate) discount program or in Library Services and Technology Act (LSTA) grants.
Ironically, the lack of oversight on private research and the lack of federal funds to support basic science may make the former less likely and the latter more likely.

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