From Longman Business DictionaryFederal fundsˌFederal ˈfunds (also Fed funds)1[plural]BANKINGFINANCE money that US banks lend to each other for short periods of time. The FEDERAL RESERVE (=the US central bank) influences this lending as one of its controls on MONEY SUPPLY (=the amount of money in the economy)The Federal Reserve Bank of New York arranged repurchase agreements, and traders took this as a signal that the Fed’s new target for the Federal Funds rate (=the interest rate banks charge each other) was 6.25%, down from 6.75%.2[plural]ECONOMICSFINANCE money from the national government that a US state has available for spendingThe state’s budget plan is 6% larger than last year’s budget, though after subtracting $17.85 billion in federal funds, state spending would only go up 2.8%. → fund
