Communication and the effectiveness of monetary policy Although people often speak of the Federal Reserve as controlling interest rates, in fact the Fed directly affects only one very short-term and (in the scheme of things) relatively unimportant interest rate, the federal funds rate.
As you may know, the federal funds rate is the interest rate at which commercial banks lend each other reserves for short periods, usually overnight. Other than managers of bank reserves and some other traders in short-term funds, few people in the private sector have much interest in the funds rate per se.