What it means
The federal funds rate is the interest rate banks charge each other for overnight loans of reserves. The FOMC sets a target range, and the New York Fed conducts open-market operations to keep the effective rate within that range.
Why it matters
It's the anchor of every other interest rate in the U.S. Mortgage rates, credit card rates, business loans, and Treasury yields all reference, directly or indirectly, the Fed funds rate.
How to use it
Track the futures-implied path (CME FedWatch Tool) to know what's already priced. Trade decisions should focus on the gap between the implied path and your view, not on the current level.
Take it further
Want a worked example or a deeper dive? Ask Rocky how this concept applies to your specific watchlist or trade idea.
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