Prime Rate

also known as the Fed, National or United States Prime Rate,
from the interest-rate specialists at www.FedPrimeRate.comSM

Wednesday, October 04, 2017

Odds At 98.5% (Very Likely) The U.S. Prime Rate Will Continue At 4.25% After The November 1, 2017 FOMC Monetary Policy Meeting

Prime Rate Forecast
Prime Rate Forecast
Prime Rate Forecast

As of right now, odds are at 98.5%  that the Federal Open Market Committee (FOMC) will vote to leave the target range for the benchmark fed funds rate at 1.00% - 1.25% at the November 1ST, 2017 monetary policy meeting (very likely.)

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The current Prime Rate, which went into effect on June 15, 2017, is 4.25%.

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NB: U.S. Prime Rate = (The Fed Funds Target Rate + 3)

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Current Odds

  • Current odds the U.S. Prime Rate will continue at 4.25% after the November 1ST, 2017 FOMC monetary policy meeting: 98.5%  (very likely), with  1.5% odds on a rate increase (extremely unlikely.)

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  • Current odds the U.S. Prime Rate will continue at 4.25% after the December 13TH, 2017 FOMC monetary policy meeting: 17.1%  (not likely), with 82.9% odds (likely) that the U.S. Prime Rate will be at least 25 basis points (0.25 percentage point) higher.

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Wednesday, September 20, 2017

Sixth FOMC Meeting of 2017 Adjourned: U.S. Prime Rate Remains At 4.25%

United States Prime Rate holds at 4.25%
U.S. Prime Rate
The Federal Open Market Committee (FOMC) of the Federal Reserve has just adjourned its sixth monetary policy meeting of 2017 and, in accordance with our most recent forecast, has voted to leave the benchmark target range for the federal funds rate at 1.00% - 1.25%. Therefore, the United States Prime Rate (a.k.a the Fed Prime Rate) will continue at the current 4.25%.

NB: U.S. Prime Rate = (The Fed Funds Target Rate + 3)

Here's a clip from today's FOMC press release (note text in bold):

"...Information received since the Federal Open Market Committee met in July indicates that the labor market has continued to strengthen and that economic activity has been rising moderately so far this year. Job gains have remained solid in recent months, and the unemployment rate has stayed low. Household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters. On a 12-month basis, overall inflation and the measure excluding food and energy prices have declined this year and are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Hurricanes Harvey, Irma, and Maria have devastated many communities, inflicting severe hardship. Storm-related disruptions and rebuilding will affect economic activity in the near term, but past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term. Consequently, the Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further. Higher prices for gasoline and some other items in the aftermath of the hurricanes will likely boost inflation temporarily; apart from that effect, inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee's 2 percent objective over the medium term. Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.

In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1 to 1-1/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

In October, the Committee will initiate the balance sheet normalization program described in the June 2017 Addendum to the Committee's Policy Normalization Principles and Plans.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Patrick Harker; Robert S. Kaplan; Neel Kashkari; and Jerome H. Powell..."

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Tuesday, September 19, 2017

Odds At 98.6% (Very Likely) The U.S. Prime Rate Will Continue At 4.25% After Tomorrow's FOMC Monetary Policy Meeting

Prime Rate Forecast
Prime Rate Forecast
Prime Rate Forecast

As of right now, odds are at 98.6%  that the Federal Open Market Committee (FOMC) will vote to leave the target range for the benchmark fed funds rate at 1.00% - 1.25% at tomorrow's monetary policy meeting (very likely.)

The current Prime Rate, which went into effect on June 15, 2017, is 4.25%.

NB: U.S. Prime Rate = (The Fed Funds Target Rate + 3)

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At 3.0%, the Commerce Department's second estimate of second quarter GDP was a very welcome figure which bested predictions.  And the icing on the cake: Corporate profits rose by $26.8 billion, after decreasing by $46.2 billion during the first quarter, according to the government's preliminary estimate.

But the U.S. economy continues to send mixed signals, which is why traders are virtually certain the Fed will do nothing with the benchmark fed funds target rate tomorrow.  Here's some more recent hard and soft economic data:

  • An estimated 156,000 nonfarm jobs were created during August 2017; economists were expecting around 180,000.  Contributing to the weakness: month-on-month average hourly earnings rose by a very tepid 0.1138%, while the year-on-year advance remained stuck at 2.5%, matching April, May, June and July.
  • Inflation continues below the Federal Reserve's 2% target.  During July, and year-on-year, both the PCE Price Index and the Core PCE Price Index were 1.4%.
  • Retail sales declined by 0.2% during August.
  • Second quarter nonfarm productivity was revised higher, from +0.9% to +1.5%.
  • Soft data: The NFIB®'s Small Business Optimism Index edged higher, from 105.2 in July to 105.3 during August.

  • We can thank Hurricane Harvey for the -0.9% reading associated with August industrial production, with the capacity utilization rate dropping to 76.1%.
  • Equities continue to surge to new records.  Here's a bull-market update, as of the September 18, 2017 close:

    • The S + P 500 Index closed at 2,503.87, a new all-time record high.  This is a 270.105% increase since the March 9, 2009 bear-market low (676.53.)
    • The Dow Jones Industrial Average (DJIA) closed at 22,331.35, a brand new all-time record high.  This is a 243.188% increase since the March 9, 2009 bear-market low (6,507.04.)
    •  The NASDAQ Composite closed at 6,454.64. This is a 408.784% increase since the March 9, 2009 bear-market low (1,268.64.)

Stay tuned for tomorrow's decision on short-term rates...
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Current Odds

  • Current odds the U.S. Prime Rate will continue at 4.25% after the September 20TH, 2017 FOMC monetary policy meeting: 98.6%  (very likely), with remaining odds --  1.4% (very unlikely) -- that the U.S. Prime Rate will be 25 basis points (0.25 percentage point) lower.

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  • Current odds the U.S. Prime Rate will continue at 4.25% after the November 1ST, 2017 FOMC monetary policy meeting: 96.7%  (very likely), with  2.0% odds on a rate increase (very unlikely) and 1.3% odds on a rate cut (very unlikely.)

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  • Current odds the U.S. Prime Rate will continue at 4.25% after the December 13TH, 2017 FOMC monetary policy meeting: 42.5%  (somewhat unlikely), with  0.6% odds on a rate cut (extremely unlikely) and 56.9% odds (on the fence) that the U.S. Prime Rate will be at least 25 basis points (0.25 percentage point) higher.

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The odds associated with fed fund futures contracts -- widely accepted as the best predictor of what the FOMC will do with the benchmark Fed Funds Target Rate -- are constantly changing, so stay tuned for the latest odds.

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Friday, August 11, 2017

Odds At 95.9% (Very Likely) The U.S. Prime Rate Will Continue At 4.25% After The September 20, 2017 FOMC Monetary Policy Meeting

Prime Rate Forecast
Prime Rate Forecast
Prime Rate Forecast

As of right now, odds are at 95.9%  that the Federal Open Market Committee (FOMC) will vote to leave the target range for the benchmark fed funds rate at 1.00% - 1.25% at the September 20TH, 2017 monetary policy meeting (very likely.)

The current Prime Rate, which went into effect on June 15, 2017, is 4.25%.

NB: U.S. Prime Rate = (The Fed Funds Target Rate + 3)

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  • At 53.9%, the Institute for Supply Management's (ISM®) July reading on the services sector indicated continued expansion, but this was a strong deceleration from June (57.4%).
     
  • At 6,163,000, job openings hit an all-time record high in June, according to the Labor Department.

    But the more significant number from the same report: New hires declined from 5,459,000 in May, to 5,356,000 in June, evidence that many employers are OK with waiting for the right candidate.

    And here's a quote from the National Federation of Independent Business® (NFIB®) Small Business Optimism Index for July:

    "...Sixty percent reported hiring or trying to hire (up 6 points), but 52 percent (87 percent of those hiring or trying to hire) reported few or no qualified applicants for the positions they were trying to fill. Nineteen percent of owners cited the difficulty of finding qualified workers as their Single Most Important Business Problem (up 4 points), second only to taxes. This is a particularly severe problem in construction (28 percent) and manufacturing (21 percent) where labor shortages are the top problem, trumping taxes and regulatory costs. Thirty-five percent of all owners reported job openings they could not fill in the current period, up 5 points, the highest reading since November 2001..."
     
  • Disinflation: Between June and July, and year-on-year, the Producer Price Index slipped from 2.0% to 1.9%, while core wholesale prices slid from 1.9% to 1.8%.

  • Today's disappointing July Consumer Price Index reading prompted futures odds to shift from a very small chance of a rate hike on September 20TH, to a very small chance of a rate cut; no change is virtually certain.  Stay tuned...
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Current Odds

  • Current odds the U.S. Prime Rate will continue at 4.25% after the September 20TH, 2017 FOMC monetary policy meeting: 95.9%  (very likely), with remaining odds --  4.1% (very unlikely) -- that the U.S. Prime Rate will be 25 basis points (0.25 percentage point) lower.

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  • Current odds the U.S. Prime Rate will continue at 4.25% after the November 1ST, 2017 FOMC monetary policy meeting: 94.1%  (very likely), with  1.9% odds on a rate increase (extremely unlikely) and 4.0% odds on a rate cut (very unlikely.)

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  • Current odds the U.S. Prime Rate will continue at 4.25% after the December 13TH, 2017 FOMC monetary policy meeting: 61.5%  (somewhat likely), with  2.6% odds on a rate cut (extremely unlikely) and 35.9% odds (somewhat unlikely) that the U.S. Prime Rate will be at least 25 basis points (0.25 percentage point) higher.

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The odds associated with fed fund futures contracts -- widely accepted as the best predictor of what the FOMC will do with the benchmark Fed Funds Target Rate -- are constantly changing, so stay tuned for the latest odds.

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Wednesday, July 26, 2017

Fifth FOMC Meeting of 2017 Adjourned: U.S. Prime Rate Holds At 4.25%

United States Prime Rate holds at 4.25%
U.S. Prime Rate
The Federal Open Market Committee (FOMC) of the Federal Reserve has just adjourned its fifth monetary policy meeting of 2017 and, in accordance with our most recent forecast, has voted to leave the benchmark target range for the federal funds rate at 1.00% - 1.25%. Therefore, the United States Prime Rate (a.k.a the Fed Prime Rate) will continue at the current 4.25%.

NB: U.S. Prime Rate = (The Fed Funds Target Rate + 3)

Here's a clip from today's FOMC press release (note text in bold):

"...Information received since the Federal Open Market Committee met in June indicates that the labor market has continued to strengthen and that economic activity has been rising moderately so far this year. Job gains have been solid, on average, since the beginning of the year, and the unemployment rate has declined. Household spending and business fixed investment have continued to expand. On a 12-month basis, overall inflation and the measure excluding food and energy prices have declined and are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further. Inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee's 2 percent objective over the medium term. Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.

In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1 to 1-1/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

For the time being, the Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee expects to begin implementing its balance sheet normalization program relatively soon, provided that the economy evolves broadly as anticipated; this program is described in the June 2017 Addendum to the Committee's Policy Normalization Principles and Plans.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Patrick Harker; Robert S. Kaplan; Neel Kashkari; and Jerome H. Powell..."

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Tuesday, July 25, 2017

Odds At 96.9% (Very Likely) The U.S. Prime Rate Will Continue At 4.25% After Tomorrow's FOMC Monetary Policy Meeting

Prime Rate Forecast
Prime Rate Forecast
Prime Rate Forecast

As of right now, odds are at 96.9%  that the Federal Open Market Committee (FOMC) will vote to leave the target range for the benchmark fed funds rate at 1.00% - 1.25% after tomorrow's monetary policy meeting (very likely.)

The current Prime Rate, which went into effect on June 15, 2017, is 4.25%.

NB: U.S. Prime Rate = (The Fed Funds Target Rate + 3)

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OK, so here's the weakness, that virtually guarantees the Fed will leave short-term rates alone tomorrow:

  • U.S. Gross Domestic Product, the final estimate for the first quarter of 2017, came in at 1.4%.
  • Average Hourly Earnings rose by 0.1526% in June, while the year-on-year increase was 2.5%.

  • Disinflation: from April to May, the year-on-year PCE Price Index slipped from 1.7% to 1.4%, while the year-on-year Core PCE Price Index slid from 1.5% to 1.4%.
  • Disinflation: From May to June, the year-on-year Consumer Price Index moved from 1.9% to 1.6%.
     
  • Between February and June of this year, gains in year-on-year Retail Sales have declined in the following order:  5.7% to 5.2% to 4.5% to 3.8% to 2.8%.
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Current Odds

  • Current odds the U.S. Prime Rate will continue at 4.25% after tomorrow's FOMC monetary policy meeting: 96.9%  (very likely), with 3.1% odds (very unlikely) the U.S. Prime Rate will rise to 4.5%.

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  • Current odds the U.S. Prime Rate will continue at 4.25% after the September 20TH, 2017 FOMC monetary policy meeting: 91.6%  (likely), with remaining odds --  8.4% (unlikely) -- that the U.S. Prime Rate will be at least 25 basis points (0.25 percentage point) higher.

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  • Current odds the U.S. Prime Rate will continue at 4.25% after the November 1ST, 2017 FOMC monetary policy meeting: 89.8%  (likely), with remaining odds --  10.2% (unlikely) -- that the U.S. Prime Rate will be at least 25 basis points (0.25 percentage point) higher.

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  • Current odds the U.S. Prime Rate will continue at 4.25% after the December 13TH, 2017 FOMC monetary policy meeting: 48%  (on the fence), with remaining odds --  52% (on the fence) -- that the U.S. Prime Rate will be at least 25 basis points (0.25 percentage point) higher.

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The odds associated with fed fund futures contracts -- widely accepted as the best predictor of what the FOMC will do with the benchmark Fed Funds Target Rate -- are constantly changing, so stay tuned for the latest odds.

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Thursday, June 22, 2017

Odds At 100% (Certain) The U.S. Prime Rate Will Continue At 4.25% After The July 26, 2017 FOMC Monetary Policy Meeting

Prime Rate Forecast
Prime Rate Forecast
Latest Prime Rate Forecast

As of right now, the investors who trade in fed fund futures have odds at 100% (as implied by current pricing on contracts) that the Federal Open Market Committee (FOMC) will vote to leave the target range for the benchmark fed funds rate at 1.00% - 1.25% at the July 26, 2017 monetary policy meeting (certain.)

The current Prime Rate, which went into effect on June 15, 2017, is 4.25%.

NB: U.S. Prime Rate = (The Fed Funds Target Rate + 3)

=======================


Yesterday we learned that the median price for a previously occupied home hit an all-time record high at $252,800.  Awesome.

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But weak wage growth is a persistent problem, and contributes much to current disinflation.  The skills gap is the key.  Simple question: How can incomes rise if all too many potential employees don't have the skills to match the many open jobs in the USA? The Labor Department's last count on job openings: 6,044,000.

New York state lawmakers voted to offer free tuition for folks living in the state with household income of 125,000 or less.  New York gets it.

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Adding to disinflation worries: light + sweet crude oil for future delivery is trading at $42.69 per barrel in New York (NYMEX / WTI) right now, and with a oil glut that probably won't go away any time soon, many are betting that the cost of crude will move sideways or get cheaper through the summer. 

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Will tax reform change the game this year?  Don't bet on it...

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Current Odds

  • Current odds the U.S. Prime Rate will continue at 4.25% after the July 26TH, 2017 FOMC monetary policy meeting: 100%  (certain.)

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  • Current odds the U.S. Prime Rate will continue at 4.25% after the September 20TH, 2017 FOMC monetary policy meeting: 86.9%  (likely), with remaining odds --  13.1% (unlikely) -- that the U.S. Prime Rate will be at least 25 basis points (0.25 percentage point) higher.

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  • Current odds the U.S. Prime Rate will continue at 4.25% after the November 1ST, 2017 FOMC monetary policy meeting: 85.1%  (likely), with remaining odds --  14.9% (unlikely) -- that the U.S. Prime Rate will be at least 25 basis points (0.25 percentage point) higher.

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  • Current odds the U.S. Prime Rate will continue at 4.25% after the December 13TH, 2017 FOMC monetary policy meeting: 54.4%  (on the fence), with remaining odds --  45.6% (on the fence) -- that the U.S. Prime Rate will be at least 25 basis points (0.25 percentage point) higher.

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The odds associated with fed fund futures contracts -- widely accepted as the best predictor of what the FOMC will do with the benchmark Fed Funds Target Rate -- are constantly changing, so stay tuned for the latest odds.

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Wednesday, June 14, 2017

United States Prime Rate Rises to 4.25%

U.S. Prime Rate Is Now 4.25%
The Federal Open Market Committee (FOMC) of the Federal Reserve has just adjourned its fourth monetary policy meeting of 2017 and, in accordance with our latest forecast, has voted to raise the benchmark target range for the federal funds rate from 0.75% - 1.00% to 1.00% - 1.25%.  Therefore, the United States Prime Rate (a.k.a the Fed or national Prime Rate) is 4.25%, effective tomorrow (June 15, 2017.)

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Here's a clip from today's FOMC press release (note text in bold):

"...Information received since the Federal Open Market Committee met in May indicates that the labor market has continued to strengthen and that economic activity has been rising moderately so far this year. Job gains have moderated but have been solid, on average, since the beginning of the year, and the unemployment rate has declined. Household spending has picked up in recent months, and business fixed investment has continued to expand. On a 12-month basis, inflation has declined recently and, like the measure excluding food and energy prices, is running somewhat below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further. Inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee's 2 percent objective over the medium term. Near term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.

In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1 to 1-1/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee currently expects to begin implementing a balance sheet normalization program this year, provided that the economy evolves broadly as anticipated. This program, which would gradually reduce the Federal Reserve's securities holdings by decreasing reinvestment of principal payments from those securities, is described in the accompanying addendum to the Committee's Policy Normalization Principles and Plans.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Patrick Harker; Robert S. Kaplan; and Jerome H. Powell. Voting against the action was Neel Kashkari, who preferred at this meeting to maintain the existing target range for the federal funds rate..."
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Tuesday, June 13, 2017

Odds At 99.6% (Extremely Likely) The U.S. Prime Rate Will Rise To 4.25% Tomorrow

Prime Rate Forecast
Prime Rate Forecast
Latest Prime Rate Forecast

As of right now, the investors who trade in fed fund futures have odds at 99.6% (as implied by current pricing on contracts) that the Federal Open Market Committee (FOMC) will vote to raise the target range for the benchmark fed funds rate from 0.75% - 1.00% to 1.00% - 1.25% tomorrow (extremely likely.)  This rate increase will cause the United States Prime Rate to rise to 4.25%.

The current Prime Rate, which went into effect on March 16, 2017, is 4.00%.

NB: U.S. Prime Rate = (The Fed Funds Target Rate + 3)

=======================

Current Odds

  • Current odds the U.S. Prime Rate will rise to 4.25% tomorrow: 99.6%  (extremely likely), with remaining odds --  0.4% (extremely unlikely) -- that the U.S. Prime Rate will rise to 4.50%.

    ==========

The odds associated with fed fund futures contracts -- widely accepted as the best predictor of what the FOMC will do with the benchmark Fed Funds Target Rate -- are constantly changing, so stay tuned for the latest odds.

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Sunday, June 04, 2017

Odds At 94.6% (Very Likely) The U.S. Prime Rate Will Rise To 4.25% After The June 14 FOMC Monetary Policy Meeting

Prime Rate Forecast
Prime Rate Forecast
Latest Prime Rate Forecast

As of right now, the investors who trade in fed fund futures have odds at 94.6% (as implied by current pricing on contracts) that the Federal Open Market Committee (FOMC) will vote to raise the target range for the benchmark fed funds rate to 1.00% - 1.25%, at the June 14 monetary policy meeting (very likely.)

The current Prime Rate, which went into effect on March 16, 2017, is 4.00%.

NB: U.S. Prime Rate = (The Fed Funds Target Rate + 3)

=======================


With a recent and weak reading on GDP, and disinflation in the core, there are arguments that the Fed should do nothing at the next FOMC meeting.

But the Fed will raise short-term rates on June 14. The May jobs report sent mixed massages:


  • 138,000 nonfarm jobs created (meh.)

     
  • Headline (U-3) unemployment down from 4.4% to 4.3% (cool.)

  • Average hourly earnings nudged up by a meager 0.1528% (booo!)

OK, so here's why the Fed will bump: The U-6 unemployment rate declined from 8.6% to 8.4%. This is a level that matches November 2007.  The Great Recession began December 2007.

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U-6 Unemployment Rate
U-6 Unemployment Rate


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Current Odds

  • Current odds the U.S. Prime Rate will rise to 4.25% after the June 14TH, 2017 FOMC monetary policy meeting: 94.6%  (very likely), with remaining odds --  5.4% (not likely) -- that the U.S. Prime Rate will continue at 4.00%.
  • Current odds the U.S. Prime Rate will continue at 4.00% after the July 26TH, 2017 FOMC monetary policy meeting: 5.1%  (not likely), with remaining odds --  94.9% (very likely) -- that the U.S. Prime Rate will be at least 25 basis points (0.25 percentage point) higher.
  • Current odds the U.S. Prime Rate will continue at 4.00% after the September 20TH, 2017 FOMC monetary policy meeting: 3.7%  (not likely), with remaining odds --  96.3% (very likely) -- that the U.S. Prime Rate will be at least 25 basis points (0.25 percentage point) higher.

    ==========

The odds associated with fed fund futures contracts -- widely accepted as the best predictor of what the FOMC will do with the benchmark Fed Funds Target Rate -- are constantly changing, so stay tuned for the latest odds.

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