Prime Rate

also known as the Fed, National or United States Prime Rate,
from the interest-rate specialists at www.FedPrimeRate.comSM

Monday, March 27, 2017

Odds At 95.7% (Very Likely) The U.S. Prime Rate Will Continue At 4.00% After The May 3, 2017 Monetary Policy Meeting

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As of right now, the investors who trade in fed fund futures have odds at 95.7% (as implied by current pricing on contracts) that the Federal Open Market Committee (FOMC) will vote to leave the target range for the benchmark fed funds rate at 0.75% - 1.00% at the Wednesday, May 3RD, 2017 monetary policy meeting (very likely.)

The current Prime Rate, which went into effect on March 16, 2017, is 4.00%.

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

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At the end of last week, we learned that Federal Reserve Banks earned $92,000,000,000 during 2016, with $91,500,000,000 (99.46%) going to the United States Treasury Department.  Here's a clip:

"...The Federal Reserve Banks' 2016 earnings were approximately $92 billion. The Reserve Banks provided for remittances to the U.S. Treasury of $91.5 billion in 2016. Interest income on securities acquired through open market operations totaled $111.1 billion, a decrease of $2.5 billion from the previous year and attributable to changes in the composition of securities held in the Federal Reserve System Open Market Account (SOMA). Interest expense on depository institutions' reserve balances and term deposits during the year was $12 billion, an increase of $5.1 billion. Interest expense on securities sold under agreements to repurchase was $1.1 billion, an increase of $874 million from the previous year. Reserve Bank operating expenses were $6.7 billion, including assessments of $2 billion for Board expenses, currency costs, and the operations of the Bureau of Consumer Financial Protection..."

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Recent economic data influencing the latest odds include readings on inflation, jobs, manufacturing, housing, energy and business optimism.

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Current Odds

  • Current odds the U.S. Prime Rate will continue at 4.00% after the May 3RD, 2017 FOMC monetary policy meeting: 95.7%  (very likely), with remaining odds --  4.3% (very unlikely) -- that the U.S. Prime Rate will rise to 4.25%.

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  • Current odds the U.S. Prime Rate will continue at 4.00% after the June 14TH, 2017 FOMC monetary policy meeting: 51.5%  (on the fence), with remaining odds --  48.5% (on the fence) -- that the U.S. Prime Rate will be at least 25 basis points (0.25 percentage point) higher.


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  • Current odds the U.S. Prime Rate will continue at 4.00% after the July 26TH, 2017 FOMC monetary policy meeting: 43.9%  (on the fence), with remaining odds --  56.1% (on the fence) -- that the U.S. Prime Rate will be at least 25 basis points (0.25 percentage point) higher.

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  • Current odds the U.S. Prime Rate will continue at 4.00% after the September 20TH, 2017 FOMC monetary policy meeting: 29.5%  (not likely), with remaining odds --  70.5% (somewhat likely) -- that the U.S. Prime Rate will be at least 25 basis points (0.25 percentage point) higher.

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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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