Prime Rate

also known as the Fed, National or United States Prime Rate,
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Friday, March 03, 2017

Odds At 79.7% (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 79.7% (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 March 15TH, 2017 monetary policy meeting (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)

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Earlier today, Fed Chair Janet Yellen let the world know what the Fed intends to do, in a refreshingly clear speech.  Here's the key snippet:

"...In short, we currently judge that it will be appropriate to gradually increase the federal funds rate if the economic data continue to come in about as we expect. Indeed, at our meeting later this month, the Committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal funds rate would likely be appropriate..."
Stay tuned for the latest odds.  Odds may experience a significant shift on Friday, March 10, 2017, when the Labor Department releases its February employment-situation report.  A weak reading on wages could prompt the FOMC to hold off on a rate increase.

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Recent economic data influencing the latest odds include readings on GDP, inflation, retail sales, jobs, consumer confidence, new home sales, existing home sales, housing starts, manufacturing, the services sector, and industrial production.

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Current Odds

  • Current odds the U.S. Prime Rate will rise to 4.00% after the March 15TH, 2017 FOMC monetary policy meeting: 79.7%  (likely), with remaining odds --  20.3% -- that the U.S. Prime Rate will remain at the current 3.75%.

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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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