Federal Funds Rate (or Fed Funds Rate) - the interest rate banks charge other banks to borrow money. Such borrowing is usually done to ensure institutions meet reserve requirements created by the Federal Reserve System.

The Fed Funds Rate is usually very close to the Discount rate, the interest rate charged to borrow directly from the Federal Reserve Bank to meet regulator reserve requirements.

Banks tend to avoid paying the discount rate and borrow from other banks at the Fed Funds Rate to stave off the additional regulatory investigation associated with turning to the Federal Reserve to meet regulatory requirements.

Learn More how the Fed Funds moves the FX Market

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