Thinking About Becoming a Real Estate Developer? question

The federal funds rate is the interest rate that banks charge each other for the use of the excess cash that banks have on-hand, from their reserves. The term used within this context is “excess”, and that is because banks do have required reserve accounts - and banks do have required reserve requirements. Reserve requirements for banks are arrived at through a multiple of the bank’s total deposits. The target rate - as is established by the Federal Open Market Committee - is the cost of money paid by commercial banks as the banks lend - or borrow - excess bank reserves, on an overnight basis. Banks are not to deploy funds from their reserve requirements, in their lending activities. Banks lend, excess funds. I.e.: not reserve requirements.