The US Federal Reserve is exploring an overhaul of the federal funds rate – a benchmark that underlies almost every financial transaction in the world – as it prepares for an eventual rise in interest rates.
The Fed funds rate is the main measure of overnight US interest rates and is currently based on the actual rates reported by brokers for overnight loans between US banks.
People familiar with the talks say the Fed may redefine its main target rate so that it takes into account a wider range of loans between banks, making it more stable and reliable.
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