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Federal Funds Rate

The federal funds rate is the interest rate financial institutions charge each other for overnight loans. Depository institutions are required by law to keep a percentage of their customers’ deposits on reserve, earning no interest on the funds. In an effort to stay as close to the reserve limit as possible and maximize their potential interest earnings, banks lend their excess reserve funds to other financial institutions.

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Less than $2,500 More than $2,500
Always Never Sometimes