Fed Fund Futures Have Odds At 79% (Somewhat Likely) The U.S. Prime Rate Will Rise on December 16, 2015
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| Prime Rate Forecast - Predictions |
As of right now, the investors who trade in fed fund futures via the CME Group have odds at 79% (as implied by current pricing on contracts) that the Federal Open Market Committee (FOMC) will vote to raise the benchmark Fed Funds Target Rate by at least 25 basis points (0.25 percentage point) at the December 16TH, 2015 monetary policy meeting (somewhat likely.)
The odds on a Fed rate hike 11 days from now -- which would be the first increase for the Fed Funds Target Rate since June 29, 2006 -- rose after investors had a chance to digest yesterday's November jobs report.
Contributing to the latest odds: recent words from Fed boss Janet Yellen, like these...
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Current Odds
- Current odds that the Prime Rate (currently 3.25%) will rise by at least 25 basis points at the December 16TH, 2015 FOMC monetary policy meeting: 79% (somewhat likely.)
======== - Current odds that the Prime Rate (currently 3.25%) will rise by at least 25 basis points at the January 27TH, 2016 FOMC monetary policy meeting: 82% (somewhat likely.)
======== - Current odds that the Prime Rate (currently 3.25%) will rise by at least 25 basis points at the March 16TH, 2016 FOMC monetary policy meeting: 92% (likely.)
======== - Current odds that the Prime Rate (currently 3.25%) will rise by at least 25 basis points at the April 27TH, 2016 FOMC monetary policy meeting: 93% (likely.)
======== - Current odds that the Prime Rate (currently 3.25%) will rise by at least 25 basis points at the June 15TH, 2016 FOMC monetary policy meeting: 96% (very likely.)
======== - Current odds that the Prime Rate (currently 3.25%) will rise by at least 25 basis points at the July 27TH, 2016 FOMC monetary policy meeting: 97% (very likely.)
======== - Current odds that the Prime Rate (currently 3.25%) will rise by at least 25 basis points at the September 21ST, 2016 FOMC monetary policy meeting: 98% (very likely.)
======== - Current odds that the Prime Rate (currently 3.25%) will rise by at least 25 basis points at the November 2ND, 2016 FOMC monetary policy meeting: 98% (very likely.)
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- NB: US Prime Rate = (The Fed Funds Target Rate + 3)
The odds related to 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.
Labels: fed_funds_target_rate, fomc, fomc_meeting, odds, prime_rate, prime_rate_forecast, prime_rate_prediction
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posted by Steve Brown | 12/05/2015 07:12:00 PM
2 Comments:
Thanks! When you state odds for rise of 25 bp "at" the 11/2/2016 meeting, do you mean "by" that meeting? If they raise it this December, are the less likely to raise it in January? Or, are your predictions independent, ie, that they are likely to raise the rate at each meeting? Can you make a prediction of the total amount they will (want to?) raise rates over the next year?
> When you state odds for rise of 25 bp
> "at" the 11/2/2016 meeting, do you mean
> "by" that meeting?
The odds are at 98% for a November 2, 2016 rate hike AT that meeting, which means for the US Prime Rate to go from the current 3.25%, to 3.50% or higher.
>> If they raise it on December 16, 2015, is
>> the Fed less likely to raise it in January?
If the Fed does a rate hike next week, the odds on another increase for January are quite small, because inflation is still very tame. The effect of each rate increase takes months to ripple through the US economy, and the Fed doesn't want to push the US back into a recession, so it is likely going to raise rates once then pause and keep a close eye on data.
>>> Can you make a prediction of the total
>>> amount they will (want to?) raise rates
>>> over the next year?
No one can, because no one can predict with any kind of accuracy what the numerous economic variables which influence FOMC decisions will look like from month to month.
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