Federal Funds Target Range

Federal funds target range means the interest rate range the Federal Reserve sets as its goal for the federal funds rate. In simple terms, it is the range where the Fed wants short-term interest rates to trade. The federal funds target range is important because it guides borrowing costs across the economy. Changes in this range can affect loans, mortgages, credit cards, savings rates, bond yields, and investor expectations. For example, if the Fed sets a target range of 5.25% to 5.50%, it wants the federal funds rate to stay within that range. The federal funds target range is not the same as every interest rate consumers pay. It influences other rates, but banks and markets set many actual borrowing rates.