Here is a glossary that defines the terms and the players in the interest-rate drama. The interest rate that the Fed charges banks to borrow reserves from the Fed. The Federal Reserve wants to be the lender of last resort, meaning that banks borrow reserves from the Fed when it is impractical to borrow from other banks. The average interest rate which federal funds actually trade at in a day. The federal funds rate will remain stable for months at a time, but the effective rate is a volatile one that will vary every business day.
Federal funds rate A target interest rate for banks borrowing reserves among themselves.
It is set by the Federal Open Markets Committee. Federal Reserve Board, or The Fed Back to top Congress founded the Federal Reserve Board, the central bank of the United States, in 1913. It conducts the nation's monetary policy and regulates its banks in order to achieve a flexible and stable economy. The seven members of the Board of Governors of the Federal Reserve System are nominated by the President and confirmed by the Senate to serve 14-year terms. The chairman of the Board of Governors is Alan Greenspan .