The Secured Overnight Financing Rate — the benchmark rate for US dollar overnight lending, replacing LIBOR as the global standard.
SOFR is the reference rate for trillions of dollars in financial contracts including derivatives, loans, and bonds. Deviations from the Fed Funds Rate signal funding stress.
Should track Fed Funds Rate closely. Spikes above the Fed target signal short-term funding stress in the banking system — an early warning of liquidity problems.