Question

Why Is The Federal Funds Rate so influential on other interest rates?

Answer 1

Basically the Federal Funds Rate is very influential on other interest rates because it decides at what interest rate banks borrow money.

Answer 2

It is so influential because it decides at what interest rate banks borrow money.

Explanation:

Federal Funds Rate : It is the interest rate at which banks and credit unions lend reserve balances to other depository institutions, on an unsecured basis.

As the money is borrowed depending upon this federal funds rate so it effects all the other related interest rates.

Hence, as it decides at what interest rate bank borrows money so, it is influential on other interest rates also.