Hi,
the federal reserve website lists a “federal funds (effective)” rate of 0.40, other sources list the fed funds rate to be 0.50 so I’m not sure what I’m missing or if I’m looking at the correct rate. I’m trying to find what central bank rates are currently and where to find them using central bank websites verse other info sites.
Federal reserve website link:
FRB: H.15 Release–Selected Interest Rates-- August 22, 2016
hi Norisvpips,
The interest rate in US is 0.50 only. to check what central banks rates are currently, you can simply check that on tradingeconomics
Google FED watch tool which offers CME it has most actual data on rate hike.
Thanks for the replies!
The goal however was to source interest rate info on the central bank website verse 3rd party sites as well as explain what was meant by “federal funds (effective)” rate.
I will keep searching…
Received an email back from FRB.gov staff, I didn’t really understand their response so I emailed back asking for clarification. Below is their email to my question asking why the Fed Funds (effective) rate is listed on the H.15 release as 0.40% but everyone (3rd party info websites) are showing 0.50%. Still don’t understand what I’m missing???
Thank you for your recent correspondence in which you sought assistance in locating the federal funds rates. The federal funds rate is the first item listed in the H.15 statistical release “Selected Interest Rates.”
At the its last meeting, the Federal Open Market Committee (FOMC) decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent.
I hope this information is helpful.
Sincerely,
Board Staff
As I understand it, the Feb issues a target rate (range) and the [I]effective [/I]fed funds rate is a weighted median of the [I]actual [/I]rates agreed between banks lending and borrowing reserve funds to and from each other.
When a bank’s level of reserves with the Fed drops to the minimum allowed then it will borrow (e.g. overnight funds) from another bank that has a surplus of reserves and they will agree a rate for that borrowing. The effective rate is then the weighted summary of the total of these transactions.
Thanks Manxx! So why do you think the Federal Funds Rate is quoted at 0.50% when it’s really a range and the effective rate is set at 0.40%
Thanks PipMeHappy, just not sure what that means in regards to why the effective rate of 0.40% is different from sites stating it to be 0.50% 
For your sanity, use the highest band (0.50) and use that to compare the Fed’s rate to that of other banks.
The point here is that the effective rate is not “set” at 0.40%. It is calculated from the [I]range [/I]of actual rates agreed between the various banks as they lend and borrow to and from one another to adjust their level of reserves with the Fed. The effective rate is only concerned with the actual interbank operations taking place between the various bänks. In simplified terms its goes like this:
The Fed sets a requirement for the minimum amount of reserves that a bank has to hold with the Central Bank with respect to the bank’s level of lending. The more the bank lends the more it has to hold reserves to cover it. This means that, at any time, some banks have excess reserves whilst others may need more as their loan base increases. These banks will lend and borrow reserves to each other within their own interbank market. Like with any market, if there is a dominant surplus of funds then the rate will come down and if there is a greater deficiency to be covered then the rates will rise. All these interbank reserve fund transactions are reported and the effective fed rate is a weighted median of the total figures.
The effective rate is not therefore itself an indicator of Fed monetary policy objectives rather it gives a picture of the pressures in the interbank market regarding reserve holdings requirements.
Therefore I don’t think this effective rate is of any real significance to us as traders. It is the Fed policy regarding its targets for the Fed rate that is relevant.
lol, will do PipMeHappy! Thanks for your time
That clears it all up, thanks Manxx! I appreciate you taking the time to explain this to me hope your day is awesome!
Yours too, and may they be many!
Thanks Manxx
