The Federal Open Market Committee meets eight times per year, which is approximately every six weeks, and sets the federal funds rate, according to the Federal Reserve. The Federal Open Market Committee adjusts the rate in response to contractions and expansions in the U.S. economy.
The federal funds rate is the rate the Federal Reserve charges banks for borrowing money, explains Bankrate. Based on the federal funds rate, lenders set the prime rate, which is a benchmark used by creditors to determine the rates of credit cards and home equity lines of credit. Because the federal funds rate determines the cost of money borrowed by banks, it also affects the returns that banks pay on savings accounts, money market accounts and certificates of deposit.