United States Prime Rate

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Friday, March 10, 2017

Odds At 93% (Very Likely) The U.S. Prime Rate Will Rise To 4.00% After The March 15, 2017 Monetary Policy Meeting

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As of right now, the investors who trade in fed fund futures have odds at 93% (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 25 basis points (0.25 percentage point) to 0.75% - 1.00% at the Wednesday, March 15TH, 2017 monetary policy meeting (very likely.)

The current Prime Rate, which went into effect on December 15, 2016, is 3.75%A 25 basis point increase on March 15TH, 2017 would cause the U.S. Prime Rate to rise to 4.00%.

NB: U.S. Prime Rate = (The Fed Funds Target Rate + 3)


From today's February jobs report:

  • At 235,000, nonfarm job gains were better than a popular consensus forecast.
  • The headline (U-3) unemployment rate held steady at 4.7%, while the U-6 jobless rate declined from 9.4% to 9.2%.
  • The civilian labor force participation rate rose from 62.9% to 63.0%.

At 2.8%, the update on year-on-year wage gains was not high enough for economists to get excited about a healthy inflation trajectory, but it was strong enough to virtually guarantee a rate increase on Wednesday.

On the month, private, nonfarm payrolls rose by $0.06 cents to $26.09 (+0.2305%), while average hourly earnings of private-sector production and nonsupervisory employees rose by $0.04 cents to $21.86 (+0.1833%.)


Recent economic data influencing the latest odds include readings on nonfarm productivity, inflation, jobs, manufacturing and the services sector.


Current Odds

  • Current odds the U.S. Prime Rate will rise to 4.00% after the March 15TH, 2017 FOMC monetary policy meeting: 93.0%  (very likely), with remaining odds --  7% (not likely) -- that the U.S. Prime Rate will remain at the current 3.75%.


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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