Central Bank Case

1993 wd

1) The federal funds rate is the term coined to describe the interest rate at which depository institutions lend and borrow overnight funds, which are maintained at the Federal Reserve, to one another. The official website of the Fed states that “By trading government securities, the New York Fed affects the federal funds rate, which is the interest rate at which depository institutions lend balances to each other overnight.”

Essentially, institutions that possess surplus end-of-day balances lend the excess funds to institutions that are facing shortfalls in their respective account balances. The federal funds rate