The federal funds rate is the interest rate at which banks in the United States lend their balances at the Federal Reserve to other institutions. Banks give each other loans based on this interest rate. The federal funds target rate is one of the tools of the Federal Reserve to influence the supply of money in the United States economy to meet its goals.
The governors of the Federal Reserve are in charge of setting the target rate. They have three choices: increase, decrease or leave the rate unchanged. The decision is taken depending on the economic conditions of the U.S.
Using the open market operations (purchases and sales of U.S. Treasury and federal agency securities), the FED tries to keep the actual Fed funds rate within a range of the target rate.
The federal funds target rate downloaded by this item is retrieved from 'thefinancials.com'. The time-series starts in 2006 and it is associated with the current symbol '^FEDERAL_FUNDS_TARGET', which of course can be changed later.
The federal funds target rate as of September 2009 is 0.002 (0.2%).
NB: If anyone knows a source where I can get longer historical data for the federal funds target rate, please send me a message. (The federal funds target rate, not the effective or the actual rate).
