Futures Market 94% Certain Prime Rate Will Hold At 3.25% After The March 17 Fed Meeting

Yesterday, The Conference Board reported that its Consumer Confidence Index (CCI) dropped from a revised figure of 37.4 for January, to a brand new record low of 25.0 for February. Wall Street economists were expecting a figure of around 35.5 for this month.

For the CCI, the baseline "100" score is linked to 1985 survey data.

The National Association of Realtors® delivered more somber economic news earlier today. Sales of previously occupied homes declined by 5.3% last month. The total number of used homes for sale fell from 3.7 to 3.6 million during January, which is a good thing, but prices continued to slide. The median cost for a preowned home fell from $175,700 to $170,300, while the average price fell from $217,600 to $212,900. Click here for historical prices and a chart.

The Commerce Department will release its report on new home sales tomorrow.

Yesterday, the S&P/Case-Shiller Home Price Indices provided an update of how property values are doing in specific U.S. cities. Notable figures for the December 2007 through December 2008 period can be found below:

• San Francisco: -31.2%
  
• San Diego: -24.8%
  
• Phoenix: -34.0%
  
• Miami: -28.8%
  
• Los Angeles: -26.4%
  
• Las Vegas: -33.0%
  
• Detroit: -21.7%
  
• National Index: -18.2%

And how are American banks doing? Right now, you can buy Citigroup (C) at $2.62 per share. A year ago, Big "C" was trading at $23.66.

Bank of America (BAC) can be purchased for $4.83 per share. Twelve months ago, BofA stock was trading at $39.70.

Bank failures are occurring at an alarming rate. So far, eight banks have failed during February, and 14 American banks have closed since the beginning of the year.

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As of right now, the investors who trade in fed funds futures at the Chicago Board of Trade have odds at 94% (as implied by current pricing on contracts) that the FOMC will vote to leave the benchmark target range for the Federal Funds Rate at its current level at the March 17^TH, 2009 monetary policy meeting.


Summary of the Latest Prime Rate Forecast:

• Current odds that the Prime Rate will remain at the current 3.25% after the March 17^TH, 2009 FOMC monetary policy meeting adjourns: 94% (very likely)
  
• NB: U.S. Prime Rate = (The Federal Funds Target Rate + 3)

The odds related to federal-funds futures contracts -- widely accepted as the best predictor of where the FOMC will take the benchmark Fed Funds Target Rate -- are constantly changing, so stay tuned for the latest odds.

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