Fifth FOMC Meeting of 2019 Adjourned: United States Prime Rate Is Now 5.25%

U.S. Prime Rate

The Federal Open Market Committee (FOMC) of the Federal Reserve System has just adjourned its fifth monetary policy meeting of 2019 and, in accordance with our latest forecast, has voted to lower the benchmark target range for the federal funds rate to 2.00% - 2.25%. Therefore, the United States Prime Rate (a.k.a the Fed Prime Rate) is now 5.25%.

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

Here's a clip from today's FOMC press release (note text in bold):

"...Information received since the Federal Open Market Committee met in June indicates that the labor market remains strong and that economic activity has been rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although growth of household spending has picked up from earlier in the year, growth of business fixed investment has been soft. On a 12-month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the Committee decided to lower the target range for the federal funds rate to 2 to 2-1/4 percent. This action supports the Committee's view that sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective are the most likely outcomes, but uncertainties about this outlook remain. As the Committee contemplates the future path of the target range for the federal funds rate, it will continue to monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

The Committee will conclude the reduction of its aggregate securities holdings in the System Open Market Account in August, two months earlier than previously indicated.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; James Bullard; Richard H. Clarida; Charles L. Evans; and Randal K. Quarles. Voting against the action were Esther L. George and Eric S. Rosengren, who preferred at this meeting to maintain the target range for the federal funds rate at 2-1/4 to 2-1/2 percent..."

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Odds At 100% (Certain) The United States Prime Rate Will Be Cut To 5.25% After The July 31, 2019 FOMC Monetary Policy Meeting

Prime Rate Forecast

Prime Rate Forecast

As of right now, our odds are at 100% the Federal Open Market Committee (FOMC) will vote to lower the target range for the benchmark fed funds rate from 2.25% - 2.50% to 2.00% - 2.25% at the July 31^ST, 2019 monetary policy meeting (certain.)

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The current U.S. Prime Rate, which went into effect on December 20^TH, 2018, is 5.50%.

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

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Here's a clip from Fed Boss Jerome H. Powell's Semiannual Monetary Policy Report to the Congress (July 10,2019.)  Note text in bold:

"...At the time of our May meeting, we were mindful of the ongoing crosscurrents from global growth and trade, but there was tentative evidence that these crosscurrents were moderating. The latest data from China and Europe were encouraging, and there were reports of progress in trade negotiations with China. Our continued patient stance seemed appropriate, and the Committee saw no strong case for adjusting our policy rate.

Fed Chairman Jerome H. Powell

Since our May meeting, however, these crosscurrents have reemerged, creating greater uncertainty. Apparent progress on trade turned to greater uncertainty, and our contacts in business and agriculture report heightened concerns over trade developments. Growth indicators from around the world have disappointed on net, raising concerns that weakness in the global economy will continue to affect the U.S. economy. These concerns may have contributed to the drop in business confidence in some recent surveys and may have started to show through to incoming data.

In our June meeting statement, we indicated that, in light of increased uncertainties about the economic outlook and muted inflation pressures, we would closely monitor the implications of incoming information for the economic outlook and would act as appropriate to sustain the expansion. Many FOMC participants saw that the case for a somewhat more accommodative monetary policy had strengthened. Since then, based on incoming data and other developments, it appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook. Inflation pressures remain muted..."

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Stay tuned for the latest odds, and for current U.S. economic data (inflation, jobs, economic growth, wages, etc.) 

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Current Odds

• Current odds the United States Prime Rate will be cut to 5.25% after the July 31^ST, 2019 FOMC monetary policy meeting: 100% (certain.)
  
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• NB: United States Prime Rate = (The Fed Funds Target Rate + 3)

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Odds At 80% (Likely) The United States Prime Rate Will Be Cut To 5.25% After The July 31, 2019 FOMC Monetary Policy Meeting

Prime Rate Forecast

Prime Rate Forecast

As of right now, our odds are at 80% the Federal Open Market Committee (FOMC) will vote to lower the target range for the benchmark fed funds rate from 2.25% - 2.50% to 2.00% - 2.25% at the  July 31^ST, 2019 monetary policy meeting (likely.)

=======

The current U.S. Prime Rate, which went into effect on December 20^TH, 2018, is 5.50%.

=======

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

=======

Stay tuned for the latest odds, and for current U.S. economic data (inflation, jobs, economic growth, wages, etc.) 

======= 

Current Odds

• Current odds the United States Prime Rate will be cut to 5.25% after the July 31^ST, 2019 FOMC monetary policy meeting: 80% (likely.)
  
  ==========

• NB: United States Prime Rate = (The Fed Funds Target Rate + 3)

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