Angie · learn
Fed funds rate
The overnight rate banks charge each other, targeted by the Federal Reserve. It is the short end of the curve every other rate is priced from.
Updated 2026-09-05
The federal funds rate is what banks charge each other for overnight lending. The Federal Reserve targets it, and it anchors the short end of the curve every other rate is priced from.
Angie does not use it directly. It uses the 10-year Treasury yield, which reflects where the market expects short rates to sit over a decade rather than where they are today. That is the right horizon for discounting a company's cash flows, which do not arrive overnight.
See also
- Monetary policy — The central bank setting the price of money to manage inflation and employment. Its main transmission into markets is the discount rate.
- Risk-free rate — The 10-year Treasury yield, standing in for the return available with essentially no risk. Every other rate in the model is built on top of it.
- Yield curve — Government bond yields plotted against maturity. It normally slopes up, and its inversion has preceded most recessions, though not on any useful schedule.
Educational content, not investment advice. Angie explains how a valuation is built so you can judge it yourself. What you do with that is your call.
