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what is the relationship between the federal funds rate and the prime interest rate? why doesn’t...

what is the relationship between the federal funds rate and the prime interest rate? why doesn’t ... Your question has been answered Let us know if you got a helpful answer. Rate this answer Question: What is the relationship between the Federal funds rate and the prime interest rate? Why doesn’t ... What is the relationship between the Federal funds rate and the prime interest rate? Why doesn’t the Federal Reserve target the prime interest rate? How is the Federal funds rate established? What role does the Federal Reserve play?

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Federal funds rate determines prime rate. Greater the federal funds rate greater the prime rate and vice versa. This is because federal funds rate determines cost of funds to banks and porime rate is what they charge to credit worthy customers

Fed doesn't not target it because it varies from bank to bank and can't be easily monitored.

Fed funds rate is established at the point where supply and demand for interbank loans meets. Federal reserve either reduces or r increases the supply of funds which changes interbank rate

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