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

Prime Rate Forecast

Latest Prime Rate Forecast

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 26^TH, 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 20^TH, 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 1^ST, 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 13^TH, 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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• NB: United States Prime Rate = (The Fed Funds Target Rate + 3)

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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Odds At 99.6% (Extremely Likely) The U.S. Prime Rate Will Rise To 4.25% Tomorrow

Prime Rate Forecast

Latest Prime Rate Forecast

As of right now, the investors who trade in fed fund futures have odds at 99.6% (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 from 0.75% - 1.00% to 1.00% - 1.25% tomorrow (extremely likely.)  This rate increase will cause the United States Prime Rate to rise to 4.25%.

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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Current Odds

• Current odds the U.S. Prime Rate will rise to 4.25% tomorrow: 99.6%  (extremely likely), with remaining odds --  0.4% (extremely unlikely) -- that the U.S. Prime Rate will rise to 4.50%.
  
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• NB: United States Prime Rate = (The Fed Funds Target Rate + 3)

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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Odds At 94.6% (Very Likely) The U.S. Prime Rate Will Rise To 4.25% After The June 14 FOMC Monetary Policy Meeting

Prime Rate Forecast

Latest Prime Rate Forecast

As of right now, the investors who trade in fed fund futures have odds at 94.6% (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 to 1.00% - 1.25%, at the June 14 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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With a recent and weak reading on GDP, and disinflation in the core, there are arguments that the Fed should do nothing at the next FOMC meeting.

But the Fed will raise short-term rates on June 14. The May jobs report sent mixed massages:

• 138,000 nonfarm jobs created (meh.)
  
   
• Headline (U-3) unemployment down from 4.4% to 4.3% (cool.)
  
  
• Average hourly earnings nudged up by a meager 0.1528% (booo!)

OK, so here's why the Fed will bump: The U-6 unemployment rate declined from 8.6% to 8.4%. This is a level that matches November 2007.  The Great Recession began December 2007.

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U-6 Unemployment Rate

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Current Odds

• Current odds the U.S. Prime Rate will rise to 4.25% after the June 14^TH, 2017 FOMC monetary policy meeting: 94.6%  (very likely), with remaining odds --  5.4% (not likely) -- that the U.S. Prime Rate will continue at 4.00%.
  
• Current odds the U.S. Prime Rate will continue at 4.00% after the July 26^TH, 2017 FOMC monetary policy meeting: 5.1%  (not likely), with remaining odds --  94.9% (very likely) -- that the U.S. Prime Rate will be at least 25 basis points (0.25 percentage point) higher.
  
• Current odds the U.S. Prime Rate will continue at 4.00% after the September 20^TH, 2017 FOMC monetary policy meeting: 3.7%  (not likely), with remaining odds --  96.3% (very likely) -- that the U.S. Prime Rate will be at least 25 basis points (0.25 percentage point) higher.
  
  ==========

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

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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Odds At 73.8% (Somewhat Likely) The U.S. Prime Rate Will Rise To 4.25% After The June 14 FOMC Monetary Policy Meeting

Prime Rate Forecast

Latest Prime Rate Forecast

As of right now, the investors who trade in fed fund futures have odds at 73.8% (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 to 1.00% - 1.25%, at the June 14 monetary policy meeting (somewhat 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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Non-Accelerating Inflation Rate of Unemployment (NAIRU): a level of unemployment below which inflation rises.

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This post-Great-Recession American economy continues to languish, despite strong reports on jobs.  Sluggish wage growth, tepid inflation, depressed productivity and continued weakness in GDP.

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Current Odds

• Current odds the U.S. Prime Rate will rise to 4.25% after the June 14^TH, 2017 FOMC monetary policy meeting: 73.8%  (somewhat likely), with remaining odds --  26.2% (not likely) -- that the U.S. Prime Rate will continue at 4.00%.
  
• Current odds the U.S. Prime Rate will continue at 4.00% after the July 26^TH, 2017 FOMC monetary policy meeting: 23.9%  (not likely), with remaining odds --  76.1% (somewhat likely) -- that the U.S. Prime Rate will be at least 25 basis points (0.25 percentage point) higher.
  
• Current odds the U.S. Prime Rate will continue at 4.00% after the September 20^TH, 2017 FOMC monetary policy meeting: 17.4%  (not likely), with remaining odds --  82.6% (likely) -- that the U.S. Prime Rate will be at least 25 basis points (0.25 percentage point) higher.
  
  ==========

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

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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