United States 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

Prime Rate Forecast
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)

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


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.)

    ==========
  • 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.

    ==========


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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Tuesday, June 13, 2017

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

Prime Rate Forecast
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)

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

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%.

    ==========

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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Sunday, June 04, 2017

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
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)

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


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
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 14TH, 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 26TH, 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 20TH, 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.

    ==========

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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Sunday, May 14, 2017

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
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)

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

Non-Accelerating Inflation Rate of Unemployment (NAIRU): a level of unemployment below which inflation rises.

 =======================

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 14TH, 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 26TH, 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 20TH, 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.

    ==========

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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Tuesday, May 02, 2017

Odds At 95.2% (Very Likely) The U.S. Prime Rate Will Continue At 4.00% After Tomorrow's FOMC Monetary Policy Meeting

Prime Rate Forecast
Prime Rate Forecast
Latest Prime Rate Forecast

As of right now, the investors who trade in fed fund futures have odds at 95.2% (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 0.75% - 1.00% at tomorrow's 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)

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


Recent economic data influencing the latest odds include:

  • Inflation: During March 2017, and year-on-year, the PCE Price Index slipped from 2.1% to 1.8%, while the Core PCE Price Index slowed from 1.8% to 1.6%.  Consumer spending moved sideways for two consecutive months.


    • For March 2017, and year-over-year, the Consumer Price Index (CPI) moved from 2.7% to 2.4%, while the Core CPI dipped from 2.2% to 2.0%.

  • The first estimate of Real GDP for the first quarter of 2017 was reported at an anemic 0.7%.

  • The ISM® Manufacturing Index (ISM) declined, month-on-month, from 57.2% to 54.8% for April 2017.

  • For the past 2 weeks, the week-ending price on a barrel of crude oil for future delivery has hovered below the $50-per-barrel mark @ NYMEX WTI.  The last time the week-ending close was above $55 per barrel was July 3, 2015.

  • For March 2017, the year-on-year change for retail sales retreated from 5.7% to 5.2%.

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Current Odds

  • Current odds the U.S. Prime Rate will continue at 4.00% after tomorrow's FOMC monetary policy meeting: 95.2%  (very likely), with remaining odds --  4.8% (very unlikely) -- that the U.S. Prime Rate will rise to 4.25%.

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  • Current odds the U.S. Prime Rate will continue at 4.00% after the June 14TH, 2017 FOMC monetary policy meeting: 29.3%  (not likely), with remaining odds --  70.7% (somewhat likely) -- 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 4.00% after the July 26TH, 2017 FOMC monetary policy meeting: 26.4%  (not likely), with remaining odds --  73.6% (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 20TH, 2017 FOMC monetary policy meeting: 17.7%  (not likely), with remaining odds --  82.3% (likely) -- that the U.S. Prime Rate will be at least 25 basis points (0.25 percentage point) higher.

    ==========

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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Monday, March 27, 2017

Odds At 95.7% (Very Likely) The U.S. Prime Rate Will Continue At 4.00% After The May 3, 2017 Monetary Policy Meeting

Prime Rate Forecast
Prime Rate Forecast
Latest Prime Rate Forecast

As of right now, the investors who trade in fed fund futures have odds at 95.7% (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 0.75% - 1.00% at the Wednesday, May 3RD, 2017 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)

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

At the end of last week, we learned that Federal Reserve Banks earned $92,000,000,000 during 2016, with $91,500,000,000 (99.46%) going to the United States Treasury Department.  Here's a clip:

"...The Federal Reserve Banks' 2016 earnings were approximately $92 billion. The Reserve Banks provided for remittances to the U.S. Treasury of $91.5 billion in 2016. Interest income on securities acquired through open market operations totaled $111.1 billion, a decrease of $2.5 billion from the previous year and attributable to changes in the composition of securities held in the Federal Reserve System Open Market Account (SOMA). Interest expense on depository institutions' reserve balances and term deposits during the year was $12 billion, an increase of $5.1 billion. Interest expense on securities sold under agreements to repurchase was $1.1 billion, an increase of $874 million from the previous year. Reserve Bank operating expenses were $6.7 billion, including assessments of $2 billion for Board expenses, currency costs, and the operations of the Bureau of Consumer Financial Protection..."

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Recent economic data influencing the latest odds include readings on inflation, jobs, manufacturing, housing, energy and business optimism.

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Current Odds

  • Current odds the U.S. Prime Rate will continue at 4.00% after the May 3RD, 2017 FOMC monetary policy meeting: 95.7%  (very likely), with remaining odds --  4.3% (very unlikely) -- that the U.S. Prime Rate will rise to 4.25%.

    ==========
  • Current odds the U.S. Prime Rate will continue at 4.00% after the June 14TH, 2017 FOMC monetary policy meeting: 51.5%  (on the fence), with remaining odds --  48.5% (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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  • Current odds the U.S. Prime Rate will continue at 4.00% after the July 26TH, 2017 FOMC monetary policy meeting: 43.9%  (on the fence), with remaining odds --  56.1% (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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  • Current odds the U.S. Prime Rate will continue at 4.00% after the September 20TH, 2017 FOMC monetary policy meeting: 29.5%  (not likely), with remaining odds --  70.5% (somewhat likely) -- that the U.S. Prime Rate will be at least 25 basis points (0.25 percentage point) higher.

    ==========

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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Friday, March 10, 2017

Odds At 93% (Very Likely) The U.S. Prime Rate Will Rise To 4.00% After The March 15, 2017 Monetary Policy Meeting

Prime Rate Forecast
Prime Rate Forecast
Latest Prime Rate Forecast

As of right now, the investors who trade in fed fund futures have odds at 93% (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 by 25 basis points (0.25 percentage point) to 0.75% - 1.00% at the Wednesday, March 15TH, 2017 monetary policy meeting (very likely.)

The current Prime Rate, which went into effect on December 15, 2016, is 3.75%A 25 basis point increase on March 15TH, 2017 would cause the U.S. Prime Rate to rise to 4.00%.

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

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

From today's February jobs report:

  • At 235,000, nonfarm job gains were better than a popular consensus forecast.
  • The headline (U-3) unemployment rate held steady at 4.7%, while the U-6 jobless rate declined from 9.4% to 9.2%.
  • The civilian labor force participation rate rose from 62.9% to 63.0%.

At 2.8%, the update on year-on-year wage gains was not high enough for economists to get excited about a healthy inflation trajectory, but it was strong enough to virtually guarantee a rate increase on Wednesday.

On the month, private, nonfarm payrolls rose by $0.06 cents to $26.09 (+0.2305%), while average hourly earnings of private-sector production and nonsupervisory employees rose by $0.04 cents to $21.86 (+0.1833%.)

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Recent economic data influencing the latest odds include readings on nonfarm productivity, inflation, jobs, manufacturing and the services sector.

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Current Odds

  • Current odds the U.S. Prime Rate will rise to 4.00% after the March 15TH, 2017 FOMC monetary policy meeting: 93.0%  (very likely), with remaining odds --  7% (not likely) -- that the U.S. Prime Rate will remain at the current 3.75%.

    ==========

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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Friday, March 03, 2017

Odds At 79.7% (Likely) The U.S. Prime Rate Will Rise To 4.00% After The March 15, 2017 Monetary Policy Meeting

Prime Rate Forecast
Prime Rate Forecast
Latest Prime Rate Forecast

As of right now, the investors who trade in fed fund futures have odds at 79.7% (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 by 25 basis points (0.25 percentage point) to 0.75% - 1.00% at the March 15TH, 2017 monetary policy meeting (likely.)

The current Prime Rate, which went into effect on December 15, 2016, is 3.75%A 25 basis point increase on March 15TH, 2017 would cause the U.S. Prime Rate to rise to 4.00%.

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

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

Earlier today, Fed Chair Janet Yellen let the world know what the Fed intends to do, in a refreshingly clear speech.  Here's the key snippet:

"...In short, we currently judge that it will be appropriate to gradually increase the federal funds rate if the economic data continue to come in about as we expect. Indeed, at our meeting later this month, the Committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal funds rate would likely be appropriate..."
Stay tuned for the latest odds.  Odds may experience a significant shift on Friday, March 10, 2017, when the Labor Department releases its February employment-situation report.  A weak reading on wages could prompt the FOMC to hold off on a rate increase.

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Recent economic data influencing the latest odds include readings on GDP, inflation, retail sales, jobs, consumer confidence, new home sales, existing home sales, housing starts, manufacturing, the services sector, and industrial production.

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

Current Odds

  • Current odds the U.S. Prime Rate will rise to 4.00% after the March 15TH, 2017 FOMC monetary policy meeting: 79.7%  (likely), with remaining odds --  20.3% -- that the U.S. Prime Rate will remain at the current 3.75%.

    ==========

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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Friday, February 03, 2017

Odds At 91.1% (Likely) The U.S. Prime Rate Will Remain At 3.75% After The March 15, 2017 Monetary Policy Meeting

Prime Rate Forecast
Prime Rate Forecast
Latest Prime Rate Forecast

As of right now, the investors who trade in fed fund futures have odds at 91.1% (as implied by current pricing on contracts) that the Federal Open Market Committee (FOMC) will vote leave the target range for the benchmark fed funds rate at 0.5% - 0.75% at the March 15TH, 2017 monetary policy meeting (likely.)

The current Prime Rate, which went into effect on December 15, 2016, is 3.75%.

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

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

From today's January jobs report:

  • At 227,000, nonfarm payrolls advanced faster than expected.
  • At 2,242,000, the 2016, yearly job gains were better than the Labor Department's original reading.
  • The civilian labor force participation rate rose from 62.7% to 62.9%.
But, countering the positive:

  • The U-3 (headline) unemployment rate edged up from 4.7 to 4.8%, while the U-6 jobless rate rose from 9.2% to 9.4%.
  • For January, and significantly, average hourly earnings for all nonfarm, private employees rose by a disappointing 0.1155%, while the year-on-year hourly figure declined from 2.9% to 2.5%.

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With some influence on the latest odds: January experienced a very modest retreat for the services sector.

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Stay tuned for the latest odds...

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Current Odds

  • Current odds the U.S. Prime Rate will remain at the current 3.75% after the March 15TH, 2017 FOMC monetary policy meeting: 91.1%  (likely), with remaining odds --  8.9% -- that short-term rates will be at least 25 basis points (0.25 percentage point) higher.

     ==========
  • Current odds the U.S. Prime Rate will remain at the current 3.75% after the May 3RD, 2017 FOMC monetary policy meeting: 69.7%  with remaining odds --  30.3% -- that short-term rates will be at least 25 basis points (0.25 percentage point) higher.

     ==========
  • Current odds the U.S. Prime Rate will remain at the current 3.75% after the June 14TH, 2017 FOMC monetary policy meeting: 34.3%  with remaining odds --  65.7% (somewhat likely) -- that short-term rates will be at least 25 basis points (0.25 percentage point) higher.


    ==========

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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Tuesday, January 31, 2017

Odds At 96% (Extremely Likely) The U.S. Prime Rate Will Remain At 3.75% After Tomorrow's Monetary Policy Meeting

Prime Rate Forecast
Prime Rate Forecast
Latest Prime Rate Forecast

As of right now, the investors who trade in fed fund futures have odds at 96% (as implied by current pricing on contracts) that the Federal Open Market Committee (FOMC) will vote leave the target range for the benchmark fed funds rate at 0.5% - 0.75% at tomorrow's monetary policy meeting (extremely likely.)

The current Prime Rate, which went into effect on December 15, 2016, is 3.75%.

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

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

Looks like Wall Street's honeymoon with Donald Trump may be over, as waning technology stocks and various earnings misses conspired to clip the Dow Jones Industrial Average (DJIA), which closed at 19,864.09 today, 1.178% lower than its record-high close of 20,100.91, set on January 26, 2017.

The S + P 500 Index finished the day at 2,278.87, a 0.848% retreat from its record-high close of 2,298.37, set on January 25, 2017.


Let's hope our new president gets the message, and backs off from obviously overzealous attacks on legal immigration.

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Influencing the latest odds include readings on GDP, small-business optimism, inflation, retail sales, jobs, wages, consumer confidence, consumer sentiment, new home sales, existing home sales, housing starts, manufacturing, the services sector, and industrial production.

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

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Current Odds

  • Current odds the U.S. Prime Rate will remain at the current 3.75% after tomorrow's monetary policy meeting: 96% (extremely likely), with remaining odds -- 4% (extremely unlikely) -- that the FOMC will opt to raise short-term rates by 25 basis points (0.25 percentage point.)

    ==========
  • Current odds the U.S. Prime Rate will remain at the current 3.75% after the March 15TH, 2017 FOMC monetary policy meeting: 79%  (somewhat likely), with remaining odds --  21% -- that short-term rates will be at least 25 basis points (0.25 percentage point) higher.

     ==========
  • Current odds the U.S. Prime Rate will remain at the current 3.75% after the May 3RD, 2017 FOMC monetary policy meeting: 62.1%  with remaining odds --  37.9% -- that short-term rates will be at least 25 basis points (0.25 percentage point) higher.


    ========== 

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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Thursday, December 15, 2016

Odds At 96% (Extremely Likely) The U.S. Prime Rate Will Remain At 3.75% After The February 1, 2017 FOMC Monetary Policy Meeting

Prime Rate Forecast
Prime Rate Forecast
Latest Prime Rate Forecast

As of right now, the investors who trade in fed fund futures have odds at 96% (as implied by current pricing on contracts) that the Federal Open Market Committee (FOMC) will vote leave the target range for the benchmark fed funds rate at 0.5% - 0.75% at the February 1ST, 2017 monetary policy meeting (extremely likely.)

The current Prime Rate, which went into effect on December 15, 2016, is 3.75%.

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

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


The Trump Effect still has capital moving out of the safety of American government debt, which is driving up yields.  The yield on the Ten-Year U.S. Treasury Note continues to surge higher, which, in turn, will cause mortgage rates to rise.

Here's a recent history on the ten-year yield:

  • December 7, 2016: 2.34%
  • December 8, 2016: 2.40%
  • December 9, 2016: 2.47% 
  • December 12, 2016: 2.49% 
  • December 13, 2016: 2.48% 
  • December 14, 2016: 2.54%
  • December 15, 2016: 2.60%

Let's hope all the Wall Street enthusiasm about Mr. Trump's rise to the White House is well placed.

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Influencing the latest odds include readings on Inflation, Retail Sales, Jobs and Industrial Production.

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Current Odds

  • Current odds the U.S. Prime Rate will remain at the current 3.75% after the February 1ST, 2017 FOMC monetary policy meeting: 96% (extremely likely), with remaining odds -- 4% (extremely unlikely) -- that the FOMC will opt to raise short-term rates by 25 basis points (0.25 percentage point.)

    ==========
  • Current odds the U.S. Prime Rate will remain at the current 3.75% after the March 15TH, 2017 FOMC monetary policy meeting: 74.7%  (somewhat likely), with remaining odds --  25.3% -- that short-term rates will be at least 25 basis points (0.25 percentage point) higher.

     ==========
  • Current odds the U.S. Prime Rate will remain at the current 3.75% after the May 3RD, 2017 FOMC monetary policy meeting: 60.4%  with remaining odds --  39.6% -- that short-term rates will be at least 25 basis points (0.25 percentage point) higher.


    ========== 

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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Tuesday, December 13, 2016

Odds At 95.4% (Extremely Likely) The U.S. Prime Rate Will Rise To 3.75% At Tomorrow's FOMC Monetary Policy Meeting

Prime Rate Forecast
Prime Rate Forecast
Latest Prime Rate Forecast

As of right now, the investors who trade in fed fund futures have odds at 95.4% (as implied by current pricing on contracts) that the Federal Open Market Committee (FOMC) will vote raise the target range for the benchmark fed funds rate by 25 basis points (0.25 percentage point), to 0.5% - 0.75%, at tomorrow's monetary policy meeting (extremely likely.)

The current United States Prime Rate, which went into effect on December 17, 2015, is 3.5%.  A 25 basis point rate hike tomorrow would cause the U.S. Prime Rate to rise to 3.75%.

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

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

The 3 major stock-market indices closed with record highs again today, with the Dow Jones Industrial Average (DJIA) creeping closer to 20,000.

  • The DJIA gained 114.78 points (0.58%) to close at 19,911.21 (CHART)
  • The broader S and P 500 Index added 14.76 points (0.654%) to close at 2,271.72 (CHART)
  • The NASDAQ Composite advanced by 51.29 points (0.948%) to close at 5,463.83 (CHART)

Stay tuned for tomorrow press release from The Fed, and reports on retail sales and industrial production.

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

Current Odds

  • Current odds the U.S. Prime Rate will rise to 3.75% at tomorrow's FOMC monetary policy meeting: 95.4% (extremely likely), with remaining odds -- 4.6% (very unlikely) -- that short-term rates, including the U.S. Prime Rate, will remain at current levels.

    ==========

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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Friday, December 02, 2016

Odds At 97.2% (Extremely Likely) The U.S. Prime Rate Will Rise To 3.75% At The December 14, 2016 FOMC Monetary Policy Meeting

Prime Rate Forecast
Prime Rate Forecast
Latest Prime Rate Forecast

As of right now, the investors who trade in fed fund futures have odds at 97.2% (as implied by current pricing on contracts) that the Federal Open Market Committee (FOMC) will vote raise the target range for the benchmark fed funds rate by 25 basis points (0.25 percentage point), to 0.5% - 0.75%, at the December 14TH, 2016 monetary policy meeting (extremely likely.)

The current United States Prime Rate, which went into effect on December 17, 2015, is 3.5%.  A 25 basis point rate hike on December 14TH would cause the U.S. Prime Rate to rise to 3.75%.

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

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The November jobs report, which included a negative reading on wages and labor-force participation, was strong enough to solidify a rate hike on December 14TH .

Influencing the latest odds include readings on Inflation, GDP, Housing, Corporate Profits, Manufacturing, Consumer Confidence and Retail Sales.

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Current Odds

  • Current odds the U.S. Prime Rate will rise to 3.75% at the December 14TH, 2016 FOMC monetary policy meeting: 97.2% (extremely likely), with remaining odds -- 2.8% (very unlikely) -- that short-term rates, including the U.S. Prime Rate, will remain at current levels.

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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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Monday, November 21, 2016

Odds At 95.4% (Extremely Likely) The U.S. Prime Rate Will Rise To 3.75% At The December 14, 2016 FOMC Monetary Policy Meeting

Prime Rate Forecast
Prime Rate Forecast
Latest Prime Rate Forecast

As of right now, the investors who trade in fed fund futures have odds at 95.4% (as implied by current pricing on contracts) that the Federal Open Market Committee (FOMC) will vote raise the target range for the benchmark fed funds rate by 25 basis points (0.25 percentage point), to 0.5% - 0.75%, at the December 14TH, 2016 monetary policy meeting (extremely likely.)

The current United States Prime Rate, which went into effect on December 17, 2015, is 3.5%.  A 25 basis point rate hike on December 14TH would cause the U.S. Prime Rate to rise to 3.75%.

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

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Recent and key readings on inflation, housing, jobs and retail sales had strong influence on the latest odds.

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The yield on the 10-Year U.S. Treasury Note has been on the rise, so mortgage rates will rise too.

Here's a recent history on the 10-year yield:

  • November 08, 2016: 1.88%
  • November 09, 2016: 2.07% 
  • November 10, 2016: 2.15% 
  • November 14, 2016: 2.23% 
  • November 15, 2016: 2.23% 
  • November 16, 2016: 2.22% 
  • November 17, 2016: 2.29% 
  • November 18, 2016: 2.34%  
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Equities continue to soar to new, record-highs.  The Dow Jones Industrial Average (DJIA) closed at 18,956.69 today, while the broader Standard and Poor's 500 Index topped its history at 2,198.18. The NASDAQ Composite closed at 5,368.86.

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Current Odds

  • Current odds the U.S. Prime Rate will rise to 3.75% at the December 14TH, 2016 FOMC monetary policy meeting: 95.4% (extremely likely), with remaining odds -- 4.6% (very unlikely) -- that short-term rates, including the U.S. Prime Rate, will remain at current levels.

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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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Wednesday, December 18, 2013

2014 Prime Rate Forecast: Prime Very Likely To Contiue At 3.25% All Year

prime rate forecastHere's a clip from today's Federal Open Market Committee (FOMC) monetary policy release:

"...Beginning in January [2014], the Committee will add to its holdings of agency mortgage-backed securities at a pace of $35 billion per month rather than $40 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $40 billion per month rather than $45 billion per month..."
So the Fed has decided to lift its foot off the money-printing pedal next month, just a little bit, and will buy $75 billion of debt per month, instead of $85 billion.

Wall Street reacted positively to the Fed's decision to begin tapering its bond-buying program, with both the Dow Jones Industrial Average (DJIA) and the S and P 500 Index closing with new record highs today.

Scaling back on bond buying, after all, means that the Fed is confident that the economy will continue to improve.

Wall Street was also cheered by the Fed's solid language regarding short-term rates; another clip:

"...The Committee now anticipates, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6-1/2 percent, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal..."
In other words, the Fed is going to keep short-term rates (which includes the US Prime Rate)  in the deep freeze until the economy is very firmly in escape-velocity mode, and is willing to risk some inflation down the road to get there.

The United States Prime Rate is essentially a function of the fed funds target rate:

US Prime Rate = (The Federal Funds Target Rate + 3)

And , at 3-1/4%, the Prime is currently as low as it can go.

Month after month after month of strong, non-farm payrolls, with 2% inflation on the side.  That's what the Fed is looking for.

Earlier today, the FOMC also released projections for the benchmark fed funds target rate.  Out of 17 participants, only 2 are forecasting a increase for the fed funds target rate at some point during 2014, with 15 predicting that the FOMC will leave it where it is right now (range of 0%-0.25%.)

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Dr. Janet L. Yellen
Dr. Janet L. Yellen
Dr. Janet L. Yellen is set to take over as Fed Boss early next year.

Her challenges are many, and the scrutiny will be intense.  Continuing to steer and eventually complete the economic recovery which Ben Bernanke started will be no picnic, with the headwind of a dysfunctional Congress and a virtually empty toolbox.

But if anyone has the brains and background to get the job done, it's Dr. Yellen.

Ben Bernanke is a clever economist too.

But, despite being an expert on the Great Depression, Dr. Bernanke hasn't been able to get the US economy back to full strength, and he's had four years to try. 

Moreover, Fed Boss Bernanke was late in his reaction to the banking crisis and subsequent housing crash, a tardiness that may have contributed to the protracted nature of the worse recession since the big one back in 1929.

Let's see if Dr. Yellen can figure out how to get banks to stop sitting on their massive piles of cash, and lend to deserving businesses and entrepreneurs.

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Mortgage Rate Forecast

If the economic recovery continues at a strong and sustained pace, investors will continue to rotate out of the safety of government debt, and move to riskier assets like stocks.

If that happens, US Treasury yields will rise, which will cause mortgage rates to rise (rates associated with  30-year, fixed-rate mortgages track very closely with the yield on the Ten-Year U.S. Treasury Note.)

If the recovery peters out, then investors will scramble back to government bonds, and mortgage rates will fall.

Anyone who thinks that they can offer a more accurate prediction of American mortgage rates, will probably try to sell you a popular and vintage bridge in Brooklyn next....

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From the rate watchers here @ www.FedPrimeRate.com: All the best for 2014.

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As of right now, the investors who trade in fed funds futures at the Chicago Board of Trade have odds at 100% (as implied by current pricing on contracts) that the Federal Open Market Committee (FOMC) will vote to leave the benchmark target range for the Federal Funds Rate at its current level at the January 29TH, March 19TH and April 30TH, 2014 FOMC monetary policy meetings.


Summary of the Latest Prime Rate Forecast:

  • Current odds that the Prime Rate will remain at the current 3.25% after the January 29TH, March 19TH and April 30TH, 2014 FOMC monetary policy meetings are adjourned: 100% (certain)
  • NB: U.S. Prime Rate = (The Federal Funds Target Rate + 3)

The odds related to federal-funds futures contracts -- widely accepted as the best predictor of where the FOMC will take the benchmark Fed Funds Target Rate -- are constantly changing, so stay tuned for the latest odds.

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Wednesday, December 12, 2012

2013 Prime Rate Forecast: Prime Extremely Likely To Remain At 3.25% All Year

Herprime rate forecaste's a clip from the last (October 24, 2012) FOMC monetary policy statement:

"...In particular, the Committee also decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015..."

Today's statement was interesting because the Fed switched to explicit  employment and inflation targeting.  Clips from today's statement:

"... In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored..."

Therefore, it's an extremely good bet that the Fed won't lift short-term rates, including the US Prime Rate, during 2013, and will probably leave its cardinal interest rate exactly where it is during 2014 as well.

The Fed is currently projecting that the jobless rate will be in the range of 6.9% to 7.8% during 2013.  The projected central tendency for 2013, which leaves out the top and bottom three projections, is currently 7.4% to 7.7%.  Federal Reserve Board members and Fed Bank presidents are the contributors to these  projections.

The US Prime Rate is essentially a function of the fed funds target rate:

U.S. Prime Rate = (The Federal Funds Target Rate + 3)

At 3.25%, US Prime is currently as low as it can go.

Employment / inflation targeting is new territory for the Fed, and it explains why the central bank is willing to dump huge sums of newly printed cash into the system, risking serious inflation down the road.  The money supply continues to expand, and will only keep growing as the Fed continues to blow up its balance sheet.

The nation needs jobs in big way.  The Fed is, therefore, risking fresh, inflation-menacing cash exactly where it should be risking it: housing.  Mortgages are, after all, precisely where the Great Recession started in the first place.

Mortgage Rate Forecast

Here's another key clip from today's statement:

"...To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will purchase longer-term Treasury securities after its program to extend the average maturity of its holdings of Treasury securities is completed at the end of the year, initially at a pace of $45 billion per month..." 

Both actions described above will place continued and substantial downward pressure on mortgage rates.  The average rate on a 30-year, fixed-rate mortgage during November 2012 was 3.35%.  With the Fed doing all it can to help the housing market, don't be surprised if mortgage rates fall below Prime (3.25%) in the short term.

The Fed controls the Prime Rate much more directly than it does mortgage rates. Rates on 30-year, fixed-rate mortgages track very closely with the yield on the 10 Year U.S. Treasury Note.

In the long term, as the economy improves, capital will flow from the safety of long-term, government debt into riskier assets like equities.  As this happens, long term bond yields will rise, which in turn will cause mortgage rates to rise. 

From the entire crew here @ www.FedPrimeRate.com: All the best for 2013.

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As of right now, the investors who trade in fed funds futures at the Chicago Board of Trade have odds at 100% (as implied by current pricing on contracts) that the Federal Open Market Committee (FOMC) will vote to leave the benchmark target range for the Federal Funds Rate at its current level at the January 30TH, March 20TH and May 1ST, 2013 FOMC monetary policy meetings.


Summary of the Latest Prime Rate Forecast:

  • Current odds that the Prime Rate will remain at the current 3.25% after the January 30TH, March 20TH and May 1ST, 2013 FOMC monetary policy meetings are adjourned: 100% (certain)
  • NB: U.S. Prime Rate = (The Federal Funds Target Rate + 3)

The odds related to federal-funds futures contracts -- widely accepted as the best predictor of where the FOMC will take the benchmark Fed Funds Target Rate -- are constantly changing, so stay tuned for the latest odds.

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Saturday, December 31, 2011

2012 Prime Rate Forecast: Prime Very Likely To Remain At 3.25% All Year

prime rate forecastSince August 9, 2011, the Federal Open Market Committee (FOMC) has included the following language in each post-monetary-policy-meeting press release:

"...The Committee currently anticipates that economic conditions -- including low rates of resource utilization and a subdued outlook for inflation over the medium run -- are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013..."
This means that the U.S. Prime Rate, which is the fed funds target rate plus 3 points, is very unlikely to rise during all of 2012. And, of course, Prime can't go any lower since, at 3.25%, it's already at rock bottom.

America's central bank is unique in that it has a dual mandate: keep prices stable and keep the unemployment rate as low as possible (maximum employment.) If the Fed were like many other central banks that only have to worry about keeping prices stable, then there is no way it could send such a powerful, long term signal to markets (near-zero rates for 2 years.) However, Congress decided to complicate the Fed's mission by making it a pseudo-political organization, and that's the way it is. When 200,000+ jobs are being created month after month, then the Fed will start thinking about raising short-term interest rates. Until then, it's cheap money for American banks, businesses, credit-card borrowers, etc.

So, you savers out there who are tired of extremely weak returns on your saving accounts and CD's: don't blame Ben Bernanke. He's just doing what he's supposed to do, according to the Fed's mandate.

Mortgage Rates

The Fed doesn't control mortgage rates like it does the Prime Rate. Rates on 30-year, fixed-rate mortgages track very closely with the yield on the 10 Year US Treasury Note.

But since:

  • economic growth is probably going to remain tepid for many more months, and
  • inflation expectations are tame, and
  • Wall Street money continues to be very keen on finding shelter under the copper roof that is US government debt

mortgage rates are likely to remain extremely favorable for solid borrowers during 2012.

The Ten-Year Treasury yield was 3.31% at the end of 2010. It ended 2011 @ 1.87%.

Mortgage behemoth Freddie Mac recently reported that the average rate on a 30-year, fixed-rate mortgage ended 2011 @ a very homebuyer friendly 3.95%.

From the entire gang here @ www.FedPrimeRate.com: All the best for 2012.

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As of right now, the investors who trade in fed funds futures at the Chicago Board of Trade have odds at 100% (as implied by current pricing on contracts) that the Federal Open Market Committee (FOMC) will vote to leave the benchmark target range for the Federal Funds Rate at its current level at the January 25TH, March 13TH and April 25TH, 2012 FOMC monetary policy meetings.


Summary of the Latest Prime Rate Forecast:
  • Current odds that the Prime Rate will remain at the current 3.25% after the January 25TH, March 13TH and April 25TH FOMC monetary policy meetings are adjourned: 100% (certain)
  • NB: U.S. Prime Rate = (The Federal Funds Target Rate + 3)

The odds related to federal-funds futures contracts -- widely accepted as the best predictor of where the FOMC will take the benchmark Fed Funds Target Rate -- are constantly changing, so stay tuned for the latest odds.

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