Prime Rate

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

Thursday, June 22, 2017

Odds At 100% (Certain) The U.S. Prime Rate Will Continue At 4.25% After The July 26, 2017 FOMC Monetary Policy Meeting

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As of right now, the investors who trade in fed fund futures have odds at 100% (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 1.00% - 1.25% at the July 26, 2017 monetary policy meeting (certain.)

The current Prime Rate, which went into effect on June 15, 2017, is 4.25%.

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

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Yesterday we learned that the median price for a previously occupied home hit an all-time record high at $252,800.  Awesome.

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But weak wage growth is a persistent problem, and contributes much to current disinflation.  The skills gap is the key.  Simple question: How can incomes rise if all too many potential employees don't have the skills to match the many open jobs in the USA? The Labor Department's last count on job openings: 6,044,000.

New York state lawmakers voted to offer free tuition for folks living in the state with household income of 125,000 or less.  New York gets it.

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Adding to disinflation worries: light + sweet crude oil for future delivery is trading at $42.69 per barrel in New York (NYMEX / WTI) right now, and with a oil glut that probably won't go away any time soon, many are betting that the cost of crude will move sideways or get cheaper through the summer. 

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Will tax reform change the game this year?  Don't bet on it...

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Current Odds

  • Current odds the U.S. Prime Rate will continue at 4.25% after the July 26TH, 2017 FOMC monetary policy meeting: 100%  (certain.)

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  • Current odds the U.S. Prime Rate will continue at 4.25% after the September 20TH, 2017 FOMC monetary policy meeting: 86.9%  (likely), with remaining odds --  13.1% (unlikely) -- 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 4.25% after the November 1ST, 2017 FOMC monetary policy meeting: 85.1%  (likely), with remaining odds --  14.9% (unlikely) -- 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 4.25% after the December 13TH, 2017 FOMC monetary policy meeting: 54.4%  (on the fence), with remaining odds --  45.6% (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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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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