Odds At 98.6% (Very Likely) The U.S. Prime Rate Will Continue At 4.25% After Tomorrow's FOMC Monetary Policy Meeting

Prime Rate Forecast

Prime Rate Forecast

As of right now, odds are at 98.6%  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 tomorrow's 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 3.0%, the Commerce Department's second estimate of second quarter GDP was a very welcome figure which bested predictions.  And the icing on the cake: Corporate profits rose by $26.8 billion, after decreasing by $46.2 billion during the first quarter, according to the government's preliminary estimate.

But the U.S. economy continues to send mixed signals, which is why traders are virtually certain the Fed will do nothing with the benchmark fed funds target rate tomorrow.  Here's some more recent hard and soft economic data:

• An estimated 156,000 nonfarm jobs were created during August 2017; economists were expecting around 180,000.  Contributing to the weakness: month-on-month average hourly earnings rose by a very tepid 0.1138%, while the year-on-year advance remained stuck at 2.5%, matching April, May, June and July.
• Inflation continues below the Federal Reserve's 2% target.  During July, and year-on-year, both the PCE Price Index and the Core PCE Price Index were 1.4%.
• Retail sales declined by 0.2% during August.
• Second quarter nonfarm productivity was revised higher, from +0.9% to +1.5%.
• Soft data: The NFIB®'s Small Business Optimism Index edged higher, from 105.2 in July to 105.3 during August.
  
  
  • University of Michigan's Index of Consumer Sentiment rose from 93.4 during July, to 96.8 for August.
  • The Conference Board®'s Consumer Confidence Index® rose from 120.0 during July, to 122.9 for August.
• We can thank Hurricane Harvey for the -0.9% reading associated with August industrial production, with the capacity utilization rate dropping to 76.1%.
• Equities continue to surge to new records.  Here's a bull-market update, as of the September 18, 2017 close:
  
  
  • The S + P 500 Index closed at 2,503.87, a new all-time record high.  This is a 270.105% increase since the March 9, 2009 bear-market low (676.53.)
  • The Dow Jones Industrial Average (DJIA) closed at 22,331.35, a brand new all-time record high.  This is a 243.188% increase since the March 9, 2009 bear-market low (6,507.04.)
  •  The NASDAQ Composite closed at 6,454.64. This is a 408.784% increase since the March 9, 2009 bear-market low (1,268.64.)

Stay tuned for tomorrow's decision on short-term rates...

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Current Odds

• Current odds the U.S. Prime Rate will continue at 4.25% after the September 20^TH, 2017 FOMC monetary policy meeting: 98.6%  (very likely), with remaining odds --  1.4% (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 1^ST, 2017 FOMC monetary policy meeting: 96.7%  (very likely), with  2.0% odds on a rate increase (very unlikely) and 1.3% 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 13^TH, 2017 FOMC monetary policy meeting: 42.5%  (somewhat unlikely), with  0.6% odds on a rate cut (extremely unlikely) and 56.9% odds (on the fence) 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 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

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 20^TH, 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)

=======================

• 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 20^TH, 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 20^TH, 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.
  
  ==========
• Current odds the U.S. Prime Rate will continue at 4.25% after the November 1^ST, 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 13^TH, 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.
  
  ==========

• 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 96.9% (Very Likely) The U.S. Prime Rate Will Continue At 4.25% After Tomorrow's FOMC Monetary Policy Meeting

Prime Rate Forecast

Prime Rate Forecast

As of right now, odds are at 96.9%  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% after tomorrow's 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)

=======================

• The median price for a used home cruised to a new, all-time record high in June: $263,800.  Thumbs up.
  
• Both June Housing Starts and Building Permits advanced on both the month and the year. Happiness and cheer. 

OK, so here's the weakness, that virtually guarantees the Fed will leave short-term rates alone tomorrow:

• U.S. Gross Domestic Product, the final estimate for the first quarter of 2017, came in at 1.4%.
  
• Average Hourly Earnings rose by 0.1526% in June, while the year-on-year increase was 2.5%.
  
  
• Disinflation: from April to May, the year-on-year PCE Price Index slipped from 1.7% to 1.4%, while the year-on-year Core PCE Price Index slid from 1.5% to 1.4%.
  
• Disinflation: From May to June, the year-on-year Consumer Price Index moved from 1.9% to 1.6%.
   
• Between February and June of this year, gains in year-on-year Retail Sales have declined in the following order:  5.7% to 5.2% to 4.5% to 3.8% to 2.8%.

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Current Odds

• Current odds the U.S. Prime Rate will continue at 4.25% after tomorrow's FOMC monetary policy meeting: 96.9%  (very likely), with 3.1% odds (very unlikely) the U.S. Prime Rate will rise to 4.5%.
  
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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: 91.6%  (likely), with remaining odds --  8.4% (unlikely) -- 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 4.25% after the November 1^ST, 2017 FOMC monetary policy meeting: 89.8%  (likely), with remaining odds --  10.2% (unlikely) -- 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 4.25% after the December 13^TH, 2017 FOMC monetary policy meeting: 48%  (on the fence), with remaining odds --  52% (on the fence) -- 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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