The interest rate that the U.S. central bank, the Federal Reserve (Fed), charges on overnight loans between banks. The federal funds rate is used by the Federal Reserve to set monetary policy with the intention of maintaining price stability, or the absence of inflation. At the end of 2002, the fed funds rate stood at a four-decade low of 1.25%. The fed funds rate influences many interest rates throughout the economy and may vary daily and between the different Federal Reserve banks.