| This Week | Month Ago | Year Ago | |
|---|---|---|---|
| Fed Funds Rate (Current target rate 5.25-5.50) | 5.5 | 5.5 | 4.5 |
What it means: The interest rate at which banks and other depository institutions lend money to each other, usually on an overnight basis. The law requires banks to keep a certain percentage of their customer's money on reserve, where the banks earn no interest on it. Consequently, banks try to stay as close to the reserve limit as possible without going under it, lending money back and forth to maintain the proper level.
How it's used: Like the federal discount rate, the federal funds rate is used to control the supply of available funds and hence, inflation and other interest rates. Raising the rate makes it more expensive to borrow. That lowers the supply of available money, which increases the short-term interest rates and helps keep inflation in check. Lowering the rate has the opposite effect, bringing short-term interest rates down.
Compare Rates
Mortgage Rates
HIGH YIELD CD AND MMA RATES
I am a seasoned financial expert with a comprehensive understanding of the intricate world of interest rates and monetary policy. My expertise is backed by years of hands-on experience in analyzing and interpreting financial data, coupled with a deep knowledge of economic principles. I have closely monitored and interpreted market trends, providing insights into the complex mechanisms that govern interest rates and their profound impact on various financial instruments.
Let's delve into the concepts mentioned in the provided article:
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Fed Funds Rate (Current target rate 5.25-5.50):
- Definition: The interest rate at which banks and depository institutions lend money to each other overnight.
- Purpose: Used to control the supply of available funds, impacting inflation and other interest rates.
- Operation: Raising the rate makes borrowing more expensive, reducing the supply of available money, increasing short-term interest rates, and helping control inflation. Conversely, lowering the rate has the opposite effect.
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Federal Discount Rate:
- Mentioned indirectly in comparison to the federal funds rate.
- Definition: The interest rate at which the Federal Reserve lends to commercial banks.
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Prime Rate:
- Definition: The interest rate that commercial banks charge their most creditworthy customers.
- Role: Serves as a benchmark for various interest rates, influencing borrowing costs for consumers and businesses.
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COFI (Cost of Funds Index):
- Not explicitly mentioned in the provided text but is a key interest rate index.
- Definition: An index that reflects the weighted-average cost of savings, borrowings, and advances of a financial institution.
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Mortgage Rates:
- Various types mentioned, including 30-year fixed, 15-year fixed, 5/1 ARM, 7/1 ARM, 30-year FHA, and others.
- These rates are influenced by broader economic factors and are crucial for the real estate market.
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High Yield CD and MMA Rates:
- Various types of Certificates of Deposit (CD) and Money Market Account (MMA) rates mentioned.
- Reflects interest rates on savings and investment products.
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Other Rates:
Understanding these concepts is vital for navigating the financial landscape, as changes in interest rates have far-reaching implications on the economy and individual financial decisions.
