Odds At 30% (Not Likely) The U.S. Prime Rate Will Rise At The June 15, 2016 FOMC Monetary Policy Meeting
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| Prime Rate Forecast |
As of right now, the investors who trade in fed fund futures via the CME Group have odds at 30% (as implied by current pricing on contracts) that the Federal Open Market Committee (FOMC) will vote to raise the target range for the benchmark fed funds rate by at least 25 basis points (0.25 percentage point) at the June 15TH, 2016 monetary policy meeting (not likely.)
The current United States Prime Rate, which went into effect on December 17, 2015, is 3.5%.
NB: U.S. Prime Rate = (The Fed Funds Target Rate + 3)
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Odds on a rate increase at some point during the rest of 2016 rose as investors digested recent readings on inflation, and minutes from the last FOMC monetary policy meeting. Here's a clip:
"...Participants agreed that their ongoing assessments of the data and other incoming information, as well as the implications for the outlook, would determine the timing and pace of future adjustments to the stance of monetary policy. Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen, and inflation making progress toward the Committee's 2 percent objective, then it likely would be appropriate for the Committee to increase the target range for the federal funds rate in June. Participants expressed a range of views about the likelihood that incoming information would make it appropriate to adjust the stance of policy at the time of the next meeting. Several participants were concerned that the incoming information might not provide sufficiently clear signals to determine by mid-June whether an increase in the target range for the federal funds rate would be warranted. Some participants expressed more confidence that incoming data would prove broadly consistent with economic conditions that would make an increase in the target range in June appropriate. Some participants were concerned that market participants may not have properly assessed the likelihood of an increase in the target range at the June meeting, and they emphasized the importance of communicating clearly over the intermeeting period how the Committee intends to respond to economic and financial developments..."
The data-dependent Fed has much more significant economic data coming between now and June 15, so stay tuned for the latest rate forecast.
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Current Odds
- Current odds that the Prime Rate (currently 3.5%) will rise by at least 25 basis points at the June 15TH, 2016 FOMC monetary policy meeting: 30% (not likely.)
======== - Current odds that the Prime Rate (currently 3.5%) will rise by at least 25 basis points at the July 27TH, 2016 FOMC monetary policy meeting: 52% (on the fence.)
======== - Current odds that the Prime Rate (currently 3.5%) will rise by at least 25 basis points at the September 21ST, 2016 FOMC monetary policy meeting: 60% (on the fence.)
======== - Current odds that the Prime Rate (currently 3.5%) will rise by at least 25 basis points at the November 2ND, 2016 FOMC monetary policy meeting: 64% (somewhat likely.)
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- NB: United States Prime Rate = (The Fed Funds Target Rate + 3)
The odds associated with 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, odds, prime_rate, prime_rate_forecast, prime_rate_prediction
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posted by Steve Brown | 5/19/2016 05:49:00 PM
