Fed Fund Futures Have Odds At 81% (Somewhat Likely) The U.S. Prime Rate Will Rise Tomorrow (December 16, 2015)

Prime Rate Forecast - Predictions

Latest Prime Rate Forecast

As of right now, the investors who trade in fed fund futures via the CME Group have odds at 81% (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 tomorrow's (December 16^TH, 2015) monetary policy meeting (somewhat likely.)

There are many bankers, investors and other yield chasers out there who have been doing their best to convince the Fed that raising the cost of borrowing for everyone is a good idea, despite tame inflation and a flagging manufacturing sector that would not respond well to a stronger US dollar.

And many others have been asking:

Why would the Fed risk slowing down this still-fragile economic recovery by raising rates now? Why not wait until the economy is stronger?  If inflation expectations become a concern, they can be quashed by increasing short-term rates down the road. Moreover, all economists know how difficult it would be to reflate this post-Great-Recession, structurally morphed American economy via monetary policy, should the need arise.

Considering how devastating the Great Recession was, then why indeed. The last Fed rate increase happened more than nine years ago.  Why not wait a little longer and give the US economy a chance to establish a firmer footing, instead of making the same mistake many European central banks made by raising interest rates too soon?

Of course, when the Fed raises short-term rates, the cost of borrowing rises for many who live outside the United States too, as important, international rates like LIBOR tend to follow the Fed's benchmark Fed Funds Target Rate.

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Current Odds

• Current odds that the Prime Rate (currently 3.25%) will rise by at least 25 basis points at tomorrow's (December 16^TH, 2015) FOMC monetary policy meeting: 81% (somewhat likely.)
  
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• Current odds that the Prime Rate (currently 3.25%) will rise by at least 25 basis points at the January 27^TH, 2016 FOMC monetary policy meeting: 84% (somewhat likely.)
  
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• Current odds that the Prime Rate (currently 3.25%) will rise by at least 25 basis points at the March 16^TH, 2016 FOMC monetary policy meeting: 90% (likely.)
  
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• Current odds that the Prime Rate (currently 3.25%) will rise by at least 25 basis points at the April 27^TH, 2016 FOMC monetary policy meeting: 91% (likely.)
  
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• Current odds that the Prime Rate (currently 3.25%) will rise by at least 25 basis points at the June 15^TH, 2016 FOMC monetary policy meeting: 94% (likely.)
  
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• Current odds that the Prime Rate (currently 3.25%) will rise by at least 25 basis points at the July 27^TH, 2016 FOMC monetary policy meeting: 95% (very likely.)
  
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• Current odds that the Prime Rate (currently 3.25%) will rise by at least 25 basis points at the September 21^ST, 2016 FOMC monetary policy meeting: 97% (very likely.)
  
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• Current odds that the Prime Rate (currently 3.25%) will rise by at least 25 basis points at the November  2^ND, 2016 FOMC monetary policy meeting: 97% (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.

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