Federal Funds Rate: A key interest rate set by the Federal Reserve of the United States that directly impacts the borrowing costs of banks. This rate effectively sets a benchmark for short-term rates, as it is used to guide decisions on loan pricing and investment strategy across the banking industry. Several factors influence the Federal funds rate; it is up to the Federal Open Market Committee to decide when and how much to adjust this rate. As the “pulse” of the US economy, keeping track of this rate can be an essential part of any investor or banker’s strategic plan.