The federal funds rate

The federal funds rate is the interest rate banks charge each other for overnight loans of reserves. The FOMC does not set it directly: it announces a target range, and the Federal Reserve Bank of New York uses its policy tools to keep the effective rate inside that range.

The series is drawn as a step function because that is what it is. The target changes only at scheduled meetings — or, rarely, at an unscheduled one — and holds flat in between. Smoothing it would imply a gradual drift that never happens.