United States Prime Rate

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

Wednesday, July 21, 2010

Futures Market 100% Certain U.S. Prime Rate Will Remain At 3.25% After The August 10 FOMC Monetary Policy Meeting

prime rate forecastPresident Obama signed the Wall Street Reform and Consumer Protection Act into law today; the title of this law says it all.

The new law is sweeping, and it took a lot of Congressional dealmaking to get it passed. But there's still much more to come, for soon regulators will need to craft new rules, and, of course, lobbyists will try their best to get these new rules written in a way that favors their clients.

The White House released a top ten list of items the American people should know about in the new law. Here it is:
  1. Stronger protections for consumers against unfair credit card practices like rate hikes for existing credit card balances.
  2. Mortgage brokers will be prohibited from making higher commissions by selling mortgages they know consumers can’t afford.
  3. Free annual credit scores so people can stay on top of their finances. [Clarification: free credit scores are available if you receive worse terms on a loan because of something on your credit report, or if you are rejected.]
  4. No more taxpayer-funded bailouts. If a company can’t make it, it will have to liquidate.
  5. Greater input by company shareholders over how much a CEO gets paid. And companies’ compensation boards are now required to be truly independent.
  6. Brokers who offer investment advice will have to act in the best interests of their customers, not their own financial interests.
  7. Financial firms won't be allowed to grow so large that if one fails, it will affect the entire financial system.
  8. There will be one agency whose sole job is to make sure that consumers get the protections they deserve and to set clear rules to hold banks, mortgage companies, payday lenders, and credit card lenders accountable.
  9. Businesses can't be charged extra fees for debit card “swipe fees” that exceed the cost of processing transactions.
  10. You can learn plenty more here at WhiteHouse,gov or at financialstability.gov

There's also a cool video here.

Here's what Fed boss Ben Bernanke had to say about it:

"...The financial reform legislation approved by the Congress today represents a welcome and far-reaching step toward preventing a replay of the recent financial crisis. It strengthens the consolidated supervision of systemically important financial institutions, gives the government an important additional tool to safely wind down failing financial firms, creates an interagency council to detect and deter emerging threats to the financial system, and enhances the transparency of the Federal Reserve while preserving the political independence that is crucial to monetary policymaking. Even before passage of reform legislation, the Federal Reserve has been overhauling its supervision and regulation of banking organizations and working to strengthen financial market infrastructures and practices. We will be focused and diligent in carrying out our responsibilities under the new law..."

As of right now, the investors who trade in fed funds futures at the Chicago Board of Trade have odds at 100% (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 August 10TH 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 August 10TH, 2010 FOMC monetary policy meeting is adjourned: 100% (certain)
  • 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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