Prime Rate

also known as the Fed, National or United States Prime Rate,
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Friday, August 11, 2017

Odds At 95.9% (Very Likely) The U.S. Prime Rate Will Continue At 4.25% After The September 20, 2017 FOMC Monetary Policy Meeting

Prime Rate Forecast
Prime Rate Forecast
Prime Rate Forecast

As of right now, odds are at 95.9%  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 September 20TH, 2017 monetary policy meeting (very likely.)

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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  • At 53.9%, the Institute for Supply Management's (ISM®) July reading on the services sector indicated continued expansion, but this was a strong deceleration from June (57.4%).
     
  • At 6,163,000, job openings hit an all-time record high in June, according to the Labor Department.

    But the more significant number from the same report: New hires declined from 5,459,000 in May, to 5,356,000 in June, evidence that many employers are OK with waiting for the right candidate.

    And here's a quote from the National Federation of Independent Business® (NFIB®) Small Business Optimism Index for July:

    "...Sixty percent reported hiring or trying to hire (up 6 points), but 52 percent (87 percent of those hiring or trying to hire) reported few or no qualified applicants for the positions they were trying to fill. Nineteen percent of owners cited the difficulty of finding qualified workers as their Single Most Important Business Problem (up 4 points), second only to taxes. This is a particularly severe problem in construction (28 percent) and manufacturing (21 percent) where labor shortages are the top problem, trumping taxes and regulatory costs. Thirty-five percent of all owners reported job openings they could not fill in the current period, up 5 points, the highest reading since November 2001..."
     
  • Disinflation: Between June and July, and year-on-year, the Producer Price Index slipped from 2.0% to 1.9%, while core wholesale prices slid from 1.9% to 1.8%.

  • Today's disappointing July Consumer Price Index reading prompted futures odds to shift from a very small chance of a rate hike on September 20TH, to a very small chance of a rate cut; no change is virtually certain.  Stay tuned...
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Current Odds

  • Current odds the U.S. Prime Rate will continue at 4.25% after the September 20TH, 2017 FOMC monetary policy meeting: 95.9%  (very likely), with remaining odds --  4.1% (very unlikely) -- that the U.S. Prime Rate will be 25 basis points (0.25 percentage point) lower.

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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: 94.1%  (very likely), with  1.9% odds on a rate increase (extremely unlikely) and 4.0% odds on a rate cut (very unlikely.)

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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: 61.5%  (somewhat likely), with  2.6% odds on a rate cut (extremely unlikely) and 35.9% odds (somewhat unlikely) 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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