Is it important for the average consumer to understand how the federal funds rate works? Why or Why not?

“Yes, but only at a basic level. The federal funds rate is the interest rate on overnight loans between banks. While that loan market is far removed from what most consumers care about, the federal funds rate is a base interest rate on which other rates are built because it’s an interest rate on very short and relatively safe loans. Loans to riskier, non-bank borrowers will have higher interest rates than the federal funds rate. Also, longer-term loans like mortgages will also have higher interest rates because they require lenders to make longer-term commitments.

When the Federal Reserve raises its target for the federal funds rate (by increasing the interest rate that it pays banks on reserve balances), all other interest rates in the economy increase too, but to a decreasing extent as the duration of the instrument increases. For example, increasing the federal funds rate will have a greater effect on the 6-month T-note rate than the 30-year Treasury bond rate.”

Read in full: https://www.moneygeek.com/economics/terms/federal-funds-rate/#expert=brian-jenkins