Prime Rate

also known as the Fed, National or United States Prime Rate,
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Tuesday, November 01, 2016

Odds At 92.8% (Very Likely) The U.S. Prime Rate Will Remain At 3.5% After Tomorrow's FOMC Monetary Policy Meeting

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As of right now, the investors who trade in fed fund futures via the CME Group have odds at 92.8% (as implied by current pricing on contracts) that the Federal Open Market Committee (FOMC) will vote leave the target range for the benchmark fed funds rate at 0.25% - 0.5% at tomorrow's monetary policy meeting (very 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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Traders are still betting the Fed will do nothing with short-term rates tomorrow, despite Friday's first estimate on third quarter Gross Domestic Product (GDP), which, at 2.9% annualized, exceeded forecasts.

Yesterday we learned that year-on-year inflation, as measured by the Core PCE Price Index, moved sideways during September, at 1.7%, stubbornly below the Fed's 2% target.

Stay tuned for tomorrow's Fed press release on rates...

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Current Odds
  • Current odds the Prime Rate will continue at 3.5% after tomorrow's FOMC monetary policy meeting: 92.8% (very likely) with odds at 7.2%  for a 25 basis point (0.25 percentage point) rate increase.

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  • Current odds the Prime Rate will continue at 3.5% after the December 14TH, 2016 FOMC monetary policy meeting: 22% (unlikely), with remaining odds -- 78% (somewhat likely) -- for at least one rate increase between now and December 14TH.

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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.

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