Federal Funds interest rate (the main US interest rate) – is an interest rate at which the banks usually allocate their free means that are accounted in the US Fed Reserve System by other banks that support “overnight” system. The US Fed Reserve System controls the level of Federal Funds’ inflationary rate with the help of dealing with government notes. The decision concerning some alteration of an interest rate is accepted by Financial Market Committee which is included in structure of The US Fed Reserve System (FRS).
Many other financial organizations (such as commercial banks) set up their own percent for deposits and credits.
Interest rate – is one of the most important mechanisms with the help of which the world’s economy regulation is actualized. Particularly, the questions concerning economical growth and inflationary pressure are strictly regulated through this interest rate.
The Market’s reaction to the interest rate is one of the strongest. Actually, the adoption of prime rate by FRS and its change is a turning point for all markets and after it they are to decide in what way to move further.
All economical politics depends on interest rate and on its today’s value. The interest rate is measured in percents or basis points. Formal rate change is possible on 0.01% (one basis point), but as a rule, the real alteration occurs up to 0.25 (25 basis points).
