Changes in the federal funds rate affect consumer borrowing and saving costs indirectly: shifts in the federal funds rate tend to filter through over time to credit cards, auto loans, mortgages, certificates of deposit (CDs), and high-yield savings accounts.
October 31, 2025
high
mechanism
The federal funds rate is a short-term bank-to-bank rate that influences broader interest-rate conditions faced by consumers and lenders.
Variable-rate home equity lines of credit (HELOCs) track short-term benchmark rates such as the prime rate, and those benchmarks often move with the Federal Reserve's federal funds rate, so a Federal Reserve rate cut can quickly lower monthly payments on variable-rate HELOCs.
October 01, 2025
high
temporal
Describes the typical linkage between HELOC pricing and short-term benchmark rates influenced by Federal Reserve policy.
Mortgage interest rates tend to follow movements in the 10-year Treasury yield more closely than movements in the federal funds rate.
high
temporal
Long-term Treasury yields are a key benchmark for long-term lending rates such as 30-year fixed mortgages.
The federal funds rate is the interest rate that banks charge each other for short-term overnight loans.
high
definition
Defines the benchmark rate that guides U.S. short-term interbank lending and influences broader monetary policy transmission.
The Federal Reserve is more likely to reduce its benchmark federal funds rate when officials judge that the labor market and broader economic growth are at risk of stalling.
high
policy
Describes a general conditional principle guiding decisions to ease monetary policy.