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In page Federal Reserve:
"Federal funds, officially Federal Reserve Deposits, are the reserve balances that private banks keep at their local Federal Reserve Bank.[1] These balances are the namesake reserves of the Federal Reserve System. The purpose of keeping funds at a Federal Reserve Bank is to have a mechanism for private banks to lend funds to one another. This market for funds plays an important role in the Federal Reserve System as it is the basis for its monetary policy work. Monetary policy is put into effect partly by influencing how much interest the private banks charge each other for the lending of these funds. Federal reserve accounts contain federal reserve credit, which can be converted into federal reserve notes.[citation needed]
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