The Federal Funds Rate is the interest rate at which banks lend money to each other overnight. It is a key tool used by the Federal Reserve, the central bank of the United States, to influence monetary policy and control inflation. Changes in this rate can affect borrowing costs for consumers and businesses, impacting the overall economy. When the Federal Reserve raises the Federal Funds Rate, it typically makes loans more expensive, which can slow down economic growth. Conversely, lowering the rate can encourage borrowing and spending, stimulating economic activity. This rate is closely watched by investors and economists as an indicator of economic health.