The federal funds rate is the interest rate for

A) reserves that banks borrow from the Fed.
B) the preferred customers of the banks.
C) reserves borrowed by one bank from another bank.
D) banks belonging to the Federal Reserve System.

Federal Funds Rate

The interest rate banks and other depository institutions charge one another on overnight loans made out of their excess reserves.

Borrowed Reserves

Funds that commercial banks borrow from the central bank to meet reserve requirements, often indicative of a tight monetary policy.

Fed

The Federal Reserve System, which is the central bank of the United States responsible for monetary policy.