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between themselves is so they you know they encourage people

I don't mean of course I mean the banks. They encourage more

ah when we start looking at the indicators that they actually

Anyways guys we're going to be looking at this in more detail

of the banks to trade between themselves, borrow and lend.

to have more transactions between between themselves. And

bank to trade with with each other by borrowing and lending

of course. So the whole reason why the Fed actually charges

the Fed actually want is a free flow in market. They want each

usually a higher rate than what other banks would charge

higher as they want to encourage transactions between

the banks directly. So just to explain that a bit further what

charges banks to borrow from them directly. This is usually

it's called which is the interest rate that the Fed

going to go to the Fed themselves. So the Fed is you

know the central bank they're they're the people right at the

They can be if a bank required funds from the Fed themselves.

lending between the banks. And is the Fed involved in this?

top and then you've got the more private banks that are

in all the banks is called the effective federal funds rate.

going to the other banks and looking to borrow that bank is

two banks negotiate an appropriate rate. Obviously,

So let's just say for example rather than one bank actually

this is between them and the average rate across the board

obviously lower than than them. And the Fed a discount rate

Essentially, the Fed Funds rate is all about the rate range of

uphold the appropriate amount of reserve requirements. The

correctly, banks will borrow and lend from each other to

lender bank can charge the borrowing bank. If you remember

suggestion for the banks for a range of interest rates that

So some important info to know. The Fed Funds rate is a

the rate at which it costs banks to borrow as set by fed.

say between 0. 5% and 1% whereas the interest rate is

that banks can lend to each other so it could be let's just

that we're going to be looking at in terms of our Fed funds

rate indicators but I hope I've made it clear what the

difference actually is so the Fed funds rate is the range

durable goods goods order report these are the two points

Fed funds rate influenced by the co-inflation rate and

fiscal policies, they meet eight times a to determine the

to see what they can do about their monetary policies, about

Fed actually meets to discuss the economy and what's going on

what if you don't know what that is it's where you know the

consumer loans, credit loans and the stock market are

heavily affected by these Fed funds rate. FOMC if you know

rates are very sensitive to these changes. So that means

to legally own you know as a reserve. Short term interest

costs banks to borrow as set by the Fed. However, what

and borrow to each other in terms of of rate that they have

rates is the Fed funds rate is a range that the banks can lend

differentiates the the Fed funds rate and the interest

interest rates. The interest rates are the rate at which it

This is the federal funds rate. So to not cause confusion,

there's a difference between the Fed funds rate and the

single transaction and that's exactly what we look for here.

you're always going to have a bit of interest rate on every

in reserve. Therefore you know of course with any transaction

that occurs in the economic economic sort of industry

they would have to borrow from other banks who have a lot more

uphold this requirement. So what that means is at times

capital or cash in hand with them and every bank has to

and pretty much all banks even to have a certain amount of

and the discount rate and also establishing reserve

purchases of bonds. There was the setting of interest rates

into play. The government actually requires certain banks

policies. If you remember there were three types. There was the

requirements. Now that's where the reserve requirements come

balances on an overnight basis. So if you if you refer back to

one of the lessons that are taught about the monetary

other banks for lending them excess cash from their reserve

fund rate refers to the interest rate that banks charge

be looking at right now is a federal fund rate. The federal

section of the fundamental course. So what we're going to

Yes, hello everyone. Welcome to the first video of the third

look at to determine the Fed fund rate.