Hi guys! What is the difference between [I]Federal Funds Rate[/I] and [I]Federal Funds Effective Rate[/I], or these concepts are equivalent?
As far as I understand, [I]Federal Funds Effective Rate[/I] is the weighted average of rates that banks in the Federal Reserve System charged other banks of the Federal Reserve System when lending them some of their excessive reserves. What is the [I]Federal Funds Rate[/I] then?
The Fed Funds Rate is the target Funds rate set by the Fed at it’s FOMC meetings. That’s the one which is mainly referred to when it’s said the Fed raised/lowered rates.
Hmm… then what is the Federal Reserve Target Rate? On the Key Rates page on Bloomberg (Bloomberg - Are you a robot?) one can find the Fed Funds Rate and the Fed Reserve Target Rate.
Bloomberg’s Target Rate is what I described before - the rate the Fed set at it’s meetings. Their Funds Rate is the “traded” rate. Click on the links on the Bloomberg page. It tells you.