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Fed Funds and Financial Market Impact

Fed Funds

The term "Fed funds" refers to funds held by commercial banks in their accounts at the Federal Reserve (commonly known as the Fed). These funds represent the reserves that banks are required to hold to meet regulatory requirements. The Federal Reserve uses the federal funds rate as a tool to influence the overall interest rate levels in the economy. The federal funds rate is the interest rate at which depository institutions (banks) lend or borrow funds from each other on an overnight basis. It is determined through open market operations conducted by the Federal Reserve, where they buy or sell government securities to adjust the level of reserves in the banking system.

Impact on Financial Market

Interested in exploring the correlation between close prices and Federal Funds Rate? Check out our linear regression model.

Changes in the federal funds rate have a significant impact on the financial markets:

Note: The specific impact of the federal funds rate on the financial markets may vary depending on various factors and market conditions.