Current Odds On Prime Rate Increase for Tomorrow's (September 17, 2015) FOMC Meeting At 25% (Not Likely)

Prime Rate Forecast - Predictions

Latest Prime Rate Forecast

As of right now, the investors who trade in fed funds futures at the CME Group have odds at 25% (as implied by current pricing on contracts) that the Federal Open Market Committee (FOMC) will vote to raise the benchmark Federal Funds Target Rate by at least 25 basis points (0.25 percentage point) at the September 17^TH, 2015 (tomorrow) monetary policy meeting (not likely.)

This is a data-dependent Fed, and the numbers don't support a rate increase for tomorrow's meeting.  Despite unprecedented and unorthodox actions since the banking crisis of 2008, the Fed hasn't been able to reflate the US economy to a state that would justify the normalization of short-term rates. Inflation is still too tame, and wages still too stagnant.

Headline employment (U-3) looks pretty at 5.1%, but U-6 was 10.3% last month (U-6 is defined as Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force*.)

The labor force participation rate, which was 66.1% in August 2008, was 62.6% during August 2015*.

WTI Nymex crude oil, which was $106.89 per barrel back on September 26, 2008*, and $107.26 on June 20, 2014, is currently trading at $45.21 per barrel. Great for the average American, and great from a consumer spending perspective. But the Fed sees this as deflationary.

Weakness in China's economy will also be on the minds of FOMC participants.

Current Odds

• Current odds that the Prime Rate will rise by at least 25 basis points at the October 28^TH, 2015 FOMC monetary policy meeting: 41% (somewhat likely.)
  
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• Current odds that the Prime Rate will rise by at least 25 basis points at the December 16^TH, 2015 FOMC monetary policy meeting: 59% (somewhat likely.)
  
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• Current odds that the Prime Rate will rise by at least 25 basis points at the January 27^TH, 2016 FOMC monetary policy meeting: 67% (somewhat likely.)
  
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• Current odds that the Prime Rate will rise by at least 25 basis points at the March 16^TH, 2016 FOMC monetary policy meeting: 77% (likely.)
  
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• Current odds that the Prime Rate will rise by at least 25 basis points at the April 27^TH, 2016 FOMC monetary policy meeting: 81% (likely.)
  
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• Current odds that the Prime Rate will rise by at least 25 basis points at the June 15^TH, 2016 FOMC monetary policy meeting: 88% (likely.)
  
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• Current odds that the Prime Rate will rise by at least 25 basis points at the July 27^TH, 2016 FOMC monetary policy meeting: 91% (very likely.)
  
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• NB: US Prime Rate = (The Fed 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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