The Federal Funds Rate is the interest rate at which institutions lend funds maintained at the Federal Reserve to other institutions. The Fed Funds Rate is often looked at as a benchmark for other interest rates and has a profound influence on overall economic activity as its level can either help to stimulate the economy or control inflation pressures. The Fed’s Federal Open Market Committee (FOMC) sets targets for the Fed Funds Rate and looks to achieve these targets through its own open market operations.

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