What Is the Federal Funds Rate?
The federal funds rate is the interest rate banks charge each other for overnight loans, and the main rate the Federal Reserve targets. How it's set, how it reaches savers and borrowers, and where it stood in 2026.
In one sentence
Federal funds rate. The interest rate banks charge each other for overnight loans. The Federal Reserve sets a target range for it, and it influences many other interest rates.
How it works
Banks lend each other reserves overnight, and the rate on those loans is the federal funds rate. The Federal Reserve's committee, the FOMC, sets a target range for it at eight regularly scheduled meetings a year.1 The Fed keeps the market rate in that range mainly by setting the interest it pays banks on their reserves.2
On September 16, 2026, the FOMC raised the target range by a quarter point, to 3.75% to 4%.3
| $20,000 in savings whose rate follows the market | About $50 more interest |
|---|---|
| $300,000 floating-rate loan | About $750 more interest |
| A long-term fixed-rate mortgage already taken out | No change |
Banks don't always pass changes on fully, and long-term rates don't move one-for-one with the federal funds rate.
Learn it properly
- Growth, Inflation, and Interest RatesPart 6: Strategy, Behavior, Accounts, and Taxes · Free
- Central Banks and Monetary PolicyPart 6: Strategy, Behavior, Accounts, and Taxes
Notes and sources
- Board of Governors of the Federal Reserve System. Meeting calendars, statements, and minutes (2021-2027). Checked 2026-10-14. Back to text
- Board of Governors of the Federal Reserve System. Interest on Reserve Balances (IORB) Frequently Asked Questions. Checked 2026-10-14. Back to text
- Board of Governors of the Federal Reserve System. Federal Reserve issues FOMC statement (September 16, 2026). Checked 2026-10-06. Back to text