Odds Now At 90% (Likely) The U.S. Prime Rate Will Hold at 7.50% After the January 29, 2025 FOMC Monetary Policy Meeting

Prime Rate Prediction

Prime Rate Forecast

As of right now, our odds are at 90% (likely) the Federal Open Market Committee (FOMC) of the Federal Reserve will vote to keep the benchmark target range for the fed funds rate (TRFFR) at 4.25% - 4.50% at the January 29^TH, 2025 monetary policy meeting, leaving the U.S. Prime Rate at the current 7.50%.

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The American Consumer

Is the American consumer ready to keep the American economy going strong in 2025?

• Here's a quote from the latest (December) Index of Consumer Sentiment (ICS):

"...Broadly speaking, consumers believe that the economy has improved considerably as inflation has slowed, but they do not feel that they are thriving..."

Month-on-month, the ICS was +3.06%, while year-on-year it was +6.07%.

• Consumer Confidence declined by 7.18% this month (December, 2024.)  Here's a clip:
  
  

  "...Consumers became a bit less bullish about the stock market in December: 52.9% expected stock prices to increase over the year ahead, down from a record high of 57.2% in November. Also, 25% of consumers expected stock prices to decline, up from 21.7%. The share of consumers expecting higher interest rates over the next 12 months ticked up to 48.5% but remained near recent lows. The share expecting lower rates eased to 29.3% -- down from recent months but still quite high..."

Stay tuned...

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The United States Prime Rate was lowered to the current 7.50% on December 18, 2024.

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SUMMARY

• Current odds the U.S. Prime Rate will hold at the current 7.50% after the January 29^TH, 2025 FOMC monetary policy meeting: 90% (likely.)

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Odds Now At 95% (Very Likely) The U.S. Prime Rate Will Be Cut to 7.50% at the December 18, 2024 FOMC Monetary Policy Meeting

Prime Rate Prediction

Prime Rate Forecast

As of right now, our odds are at 95% (very likely) the Federal Open Market Committee (FOMC) of the Federal Reserve will vote to lower the benchmark target range for the fed funds rate (TRFFR) by 0.25 percentage point (25 basis points [bps]) at the December 18^TH, 2024 monetary policy meeting.


A 25 bps cut would cause Prime to decrease, from the current 7.75%, to  7.50%. 

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• Year-on-year (Y-O-Y), the  CORE Consumer Price Index edged lower, from 3.33% during October, to 3.32% during November, 2024.
  
  
• Y-O-Y, from September to October, 2024, the CORE PCE Price Index rose from 2.7% to 2.8%.
  
  
  
• On the jobs front, Y-O-Y, the U-3 (Headline) Unemployment Rate ticked up, from 4.1% during October, 2024, to 4.2% during November.
  
  It was 3.7% during November, 2023.
  

• Y-O-Y, the reading on Average Hourly Earnings was +4.03%, while Average Weekly Earnings was +3.73%.

Stay tuned...

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The United States Prime Rate was lowered to the current 7.75% on November 7, 2024.

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SUMMARY

• Current odds the U.S. Prime Rate will be cut to 7.50% at the December 18^TH, 2024 FOMC monetary policy meeting: 95% (very likely.)
  

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Federal Open Market Committee (FOMC) Monetary Policy Meeting Schedule for 2025 & 2026

👇: Here's the Federal Open Market Committee (FOMC) monetary policy meeting schedule for 2025 and 2026.

Why is this schedule important to you? Because it's at these monetary policy meetings that the FOMC votes on whether to raise, lower or make no changes to the target range for Fed Funds Target Rate, and when the Fed Funds Target Rate changes, the United States Prime Rate (also known as the Fed Prime Rate) will also change (how the United States Prime Rate works):

======👇2025👇======

• January 29, 2025
  
  
• March 19, 2025
  
  
• May 7, 2025
  
  
• June 18, 2025
  
  
• July 30, 2025
  
  
• September 17, 2025
  
  
• October 29, 2025
  
  
• December 10, 2025

======👇2026👇======

• January 28, 2026
  
  
• March 18, 2026
  
  
• April 29, 2026
  
  
• June 17, 2026
  
  
• July 29, 2026
  
  
• September 16, 2026
  
  
• October 28, 2026
  
  
• December 9, 2026

• January 27, 2027

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Odds Now At 60% (On The Fence) The U.S. Prime Rate Will Be Cut to 7.50% at the December 18, 2024 FOMC Monetary Policy Meeting

Prime Rate Prediction

Prime Rate Forecast

As of right now, our odds are at 60% (on the fence) the Federal Open Market Committee (FOMC) of the Federal Reserve will vote to lower the benchmark target range for the fed funds rate (TRFFR) by 0.25 percentage point (25 basis points [bps]) at the December 18^TH, 2024 monetary policy meeting.


A 25 bps cut would cause Prime to decrease, from the current 7.75%, to  7.50%. 

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• Year-on-year (Y-O-Y), the CORE PCE Price Index moved sideways from August to September -- 2.7% to 2.7%.
  
  
• Y-O-Y, from August to September, the PCE Price Index eased, from 2.3% to 2.1%.

Stay tuned...

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The United States Prime Rate was lowered to the current 7.75% on November 7, 2024.

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SUMMARY

• Current odds the U.S. Prime Rate will be cut to 7.50% at the December 18^TH, 2024 FOMC monetary policy meeting: 60% (On The Fence.)
  

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Odds Now At 99% (VERY LIKELY) The U.S. Prime Rate Will Be Cut By At Least 25 Basis Points (0.25 Percentage Point) at the November 7, 2024 FOMC Monetary Policy Meeting

Prime Rate Prediction

Prime Rate Forecast

As of right now, our odds are at 99% (very likely) the Federal Open Market Committee (FOMC) of the Federal Reserve will vote to lower the cardinal target range for the fed funds rate (TRFFR) by at least 0.25 percentage point (25 basis points [bps]) at the November 7^TH, 2024 monetary policy meeting.

A 25 bps cut would cause Prime to decrease, from the current 8.00%, to  7.75%. 

A 50 bps cut would lower the TRFFR to a range of 4.25% - 4.50%, and would result in a Prime Rate of 7.50%, a level not seen since December of 2022.

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• Year-on-year (Y-O-Y), the Core PCE Price Index rose from +2.6% during July, to +2.7% during August, 2024.

Y-O-Y, the Core CPI for August, 2024 came in at +3.197%.

Stay tuned...

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The United States Prime Rate was lowered to the current 8.00% on September 18, 2024.

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SUMMARY

• Current odds the U.S. Prime Rate will be cut to 7.75% or lower at the November 7^TH, 2024 FOMC monetary policy meeting: 99% (very likely.)
  

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Odds Now At 95% (VERY LIKELY) The U.S. Prime Rate Will Be Cut By At Least 25 Basis Points (0.25 Percentage Point) at the September 18, 2024 FOMC Monetary Policy Meeting

Prime Rate Prediction

Prime Rate Forecast

As of right now, our odds are at 95% (very likely) the Federal Open Market Committee (FOMC) will vote to LOWER the benchmark target range for the fed funds rate (TRFFR) by at least 25 basis points (bps) at the September 18^TH, 2024 monetary policy meeting.

If a 25 bps cut happens, the United States Prime Rate (a.k.a Fed Prime Rate) would decline from the current 8.50%, to  8.25%. 

There is also a very real chance that the FOMC will cut by 50 bps next month, setting the TRFFR at 4.75% - 5.00%.  This would result in a U.S. Prime Rate of 8.00%, a level not seen since March of 2023.

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Year-on-year (Y-O-Y), the Core PCE Price Index for June, 2024 came in at +2.6%.

Y-O-Y, the Core CPI for June, 2024 came in at +3.27%.

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Eurodollar LIBOR Has An Excellent Record of Predicting
Recessions for The American Economy
  

Over the years, U.S. dollar (Eurodollar) LIBOR rates have been good at predicting what's in the economic offing for the American economy.

Right now, there is an inversion in USD LIBOR rates.  Current rates (August 2, 2024) are as follows:

• 1-Month LIBOR: 5.46652%
  
• 3-Month LIBOR: 5.48934%
  
• 6-Month LIBOR: 5.43589%

The 6-month rate is lower than the 3-month rate, which = economic concerns ahead!  

Is LIBOR a better prognosticator than the Treasury yield curve or the LEI?  Our thesis = 👍 Yes! 🙌

• Meanwhile, tensions in the Middle East have become so volatile that evacuation orders have been issued.

Stay tuned...

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The United States Prime Rate was raised to the current 8.50% on July 26, 2023.

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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 be cut to 8.25% or lower at the September 18^TH, 2024 FOMC monetary policy meeting: 95% (very likely.)
  

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Odds Now At 90% (VERY LIKELY) The U.S. Prime Rate Will Remain at 8.50% After The July 31, 2024 FOMC Monetary Policy Meeting

Prime Rate Prediction

Prime Rate Forecast

As of right now, our odds are at 90% (very likely) the Federal Open Market Committee (FOMC) will vote to keep the benchmark target range for the fed funds rate at  5.25% - 5.50% at the July 31^ST, 2024 monetary policy meeting, with the United States Prime Rate (a.k.a Fed Prime Rate) holding at 8.50%.

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Futures Market Has No Idea Where Where Short-Term Rates Will Be at The End of This Year
  

Current Interest-Rate-Futures Market Predictions for
the December 18, 2024 FOMC Policy Meeting

Nice △pyramid△ this 👆🔺👆 chart is, n'est-ce pas?

Right now, a 44% majority believe that the Fed will have cut rates by 50 basis points (0.50 percentage point) by the end of 2024.  If they're right, that would put the U.S. Prime Rate at an even 8.00% at year-end.

• From the May Jobs Report: Year-on-year (Y-O-Y), Average Weekly Earnings advanced by +4.08%, while the reading on Average Weekly Earnings was +3.78%
  
  
  • The U-3 (official) jobless rate edged higher, from 3.9% during April, to 4.0% during May, 2024.
  
  
• Y-O-Y, the Core CPI for May, 2024 came in at +3.42%.
   

Stay tuned...

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The United States Prime Rate was raised to the current 8.50% on July 26, 2023.

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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 remain at 8.50% after the July 31^ST, 2024 FOMC monetary policy meeting: 90% (very likely.)
  

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Odds Now At 90% (VERY LIKELY) The U.S. Prime Rate Will Remain at 8.50% After The June 12, 2024 FOMC Monetary Policy Meeting

Prime Rate Prediction

Prime Rate Forecast

As of right now, our odds are at 90% (very likely) the Federal Open Market Committee (FOMC) will vote to keep the benchmark target range for the fed funds rate at  5.25% - 5.50% at the June 12^TH, 2024 monetary policy meeting, with the United States Prime Rate (a.k.a Fed Prime Rate) holding at 8.50%.

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Jobs + Wages Weakening: Exactly What The Fed Wants
  

• 
  The number of jobless people per job opening crept up during March, 2024 (graphic.)  A lagging indicator, but nevertheless: further proof that the Fed's mission of killing jobs, and keeping short-term interest rates elevated, to tame inflation, is working.

• From the April Jobs Report: A rare negative month-on-month reading for Average Weekly Earnings (-0.09%.)

Stay tuned...

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The United States Prime Rate was raised to the current 8.50% on July 26, 2023.

=======

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

======= 

Current Odds

• Current odds the U.S. Prime Rate will remain at 8.50% after the June 12^TH, 2024 FOMC monetary policy meeting: 90% (very likely.)
  

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Odds Now At 95% (VERY LIKELY) The U.S. Prime Rate Will Remain at 8.50% After The May 1, 2024 FOMC Monetary Policy Meeting

Prime Rate Prediction

Prime Rate Forecast

As of right now, our odds are at 95% (very likely) the Federal Open Market Committee (FOMC) will vote to keep the benchmark target range for the fed funds rate at  5.25% - 5.50% at the May 1^ST, 2024 monetary policy meeting, with the United States Prime Rate (a.k.a Fed Prime Rate) holding at 8.50%.

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Latest on Disinflation
 

• Year-on-year (Y-O-Y), the Core Consumer Price Index (CPI) slipped from 3.86% during January, to 3.75% during February, 2024. Good disinflation news...but not great.

• Y-O-Y, The Core PCE Price Index moved sideways, remaining at 2.8% from January to February of this year. With food + energy added to the mix, the PCE Price Index edged in the wrong direction: up, from 2.4% to 2.5%.

Wages

• Y-O-Y, average hourly + average weekly earnings advanced in sync, both by 4.14%, according to last Friday's Employment Situation Report for March, 2024.

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And so, based on these and other economic data, the Fed is likely to do nothing with the benchmark fed funds target rate on May 1^ST, 2024, which would mean Prime staying where it is until the following meeting and decision on short-term rates (June 12, 2024.)

Stay tuned...

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The United States Prime Rate was raised to the current 8.50% on July 26, 2023.

=======

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

======= 

Current Odds

• Current odds the U.S. Prime Rate will remain at 8.50% after the May 1^ST, 2024 FOMC monetary policy meeting: 95% (very likely.)
  

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Odds Now At 90% (Very Likely) The U.S. Prime Rate Will Continue At 8.50% After The March 20, 2024 FOMC Monetary Policy Meeting

Prime Rate Prediction

Prime Rate Forecast

As of right now, our odds are at 90% (very likely) the Federal Open Market Committee (FOMC) will vote to keep the benchmark target range for the fed funds rate at  5.25% - 5.50% at the March 20^TH, 2024 monetary policy meeting, with the United States Prime Rate (a.k.a Fed Prime Rate) holding at 8.50%.

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The U.S. economy remains strong, despite the relatively high cost of borrowing. Both short- and long-term interest rates are restrictive right now, and have been for some time. This interest-rate environment should have helped to cool the American consumer down, but so far, that hasn't happened.

The economy grew at a healthy 3.3% during Q4, 2023, while the unemployment rate held steady at 3.7% last month, with an estimated 353,000 non-farm jobs added to the American workforce.

So, at this point, it's unlikely the Fed will lower the benchmark fed funds target rate on March 20^TH, as many were hoping might happen.

Stay tuned...

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The United States Prime Rate was raised to the current 8.50% on July 26, 2023.

=======

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

======= 

Current Odds

• Current odds the U.S. Prime Rate will continue at 8.50% after the March 20^TH, 2024 FOMC monetary policy meeting: 90% (very likely.)
  

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Odds Now At 90% (Very Likely) The U.S. Prime Rate Will Continue At 8.50% After The January 31, 2024 FOMC Monetary Policy Meeting

Prime Rate Prediction

Prime Rate Forecast

As of right now, our odds are at 90% (very likely) the Federal Open Market Committee (FOMC) will vote to keep the benchmark target range for the fed funds rate at  5.25% - 5.50% at the January 31^ST, 2024 monetary policy meeting, with the United States Prime Rate (a.k.a Fed Prime Rate) remaining at 8.50%.

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Year-on-Year (Y-o-Y), the Core PCE, the Fed's preferred inflation gauge, fell from 3.4% during October 2023, to 3.2% during November, 2023.  It was 4.8% back in November of 2022.

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Right now, we have odds at 65% (on the fence) the Fed will cut short-term rates, including the U.S. Prime Rate, by 25 basis points (0.25 percentage point) at the March 20, 2024 FOMC meeting. 

Stay tuned...

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The United States Prime Rate was raised to the current 8.50% on July 26, 2023.

=======

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

======= 

Current Odds

• Current odds the U.S. Prime Rate will continue at 8.50% after the January 31^ST, 2024 FOMC monetary policy meeting: 90% (very likely.)
  

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FOMC Meeting Schedule for 2024

Here's the 2024 meeting schedule for the Federal Open Market Committee (FOMC.)

Why is this schedule important to you? Because it's at these monetary policy meetings that the FOMC votes on whether to raise, lower or make no changes to the target range for Fed Funds Target Rate, and when the Fed Funds Target Rate changes, the United States Prime Rate (also known as the Fed Prime Rate) will also change (how the United States Prime Rate works):

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• January 31, 2024
• March 20, 2024
• May 1, 2024
• June 12, 2024
• July 31, 2024
• September 18, 2024
• November 7, 2024
• December 18, 2024

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Odds Now At 100% (Certain) The U.S. Prime Rate Will Continue At 8.50% After The December 13, 2023 FOMC Monetary Policy Meeting

Prime Rate Prediction

Prime Rate Forecast

As of right now, our odds are at 100% (certain) the Federal Open Market Committee (FOMC) will vote to keep the benchmark target range for the fed funds rate at  5.25% - 5.50% at the December 13^TH, 2023 monetary policy meeting, with the United States Prime Rate (a.k.a Fed Prime Rate) holding at 8.50%.

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If The Disinflation Continues,
The Fed May Be Done with Rate Hikes:

 

• Year-on-Year (Y-o-Y), The October, 2023 The Core Consumer Prices Index (CPI) came in at +4.031%.  It was 6.28% back in October of 2022.
  
  
• Y-o-Y, The October, 2023 Core Producer Prices Index (PPI) came in at +2.9%.
  
  
• Y-o-Y, the Core PCE fell from 3.7% during September, to 3.5% during October, 2023.  It was 5.33% back in October of 2022.
  
  

Rate hikes have been aggressive since May of 2022, so remaining on hold is the right thing to do. The last thing the Fed wants to do is drag the economy down into a deep recession.  A soft landing remains the target.

 

Stay tuned...

 

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The United States Prime Rate was raised to the current 8.50% on July 26, 2023.

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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 continue at 8.50% after the December 13^TH, 2023 FOMC monetary policy meeting: 100% (certain.)
  

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Odds Now At 90% (Likely) The U.S. Prime Rate Will Hold At 8.50% After The November 1, 2023 FOMC Monetary Policy Meeting

Prime Rate Prediction

Prime Rate Forecast

As of right now, our odds are at 90% (likely) the Federal Open Market Committee (FOMC) will vote to keep the benchmark target range for the fed funds rate at  5.25% - 5.50% at the November 1^ST, 2023 monetary policy meeting, with the United States Prime Rate (a.k.a Fed Prime Rate) holding at 8.50%.

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Continued Softening In The Job Market:
The Fed Likes To See This

 

From the August, 2023 Job Openings and Labor Turnover report:

• Year-on-Year (Y-o-Y), job openings are down by 588,000, or -5.77%.
  
  
• Y-o-Y, hires are down by 621,000, or -9.59%.

Meanwhile, Y-o-Y, the closely watched Core PCE fell from 4.3% in July, to 3.9% during August, 2023.  It was 4.9% back in August of 2022.

 

The taming of inflation continues, as does the culling jobs. Stay tuned...

 

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The United States Prime Rate was raised to the current 8.50% on July 26, 2023.

=======

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

======= 

Current Odds

• Current odds the U.S. Prime Rate will continue at 8.50% after the November 1^ST, 2023 FOMC monetary policy meeting: 90% (likely.)
  

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Odds Now At 80% (Likely) The U.S. Prime Rate Will Hold At 8.50% After The September 20, 2023 FOMC Monetary Policy Meeting

Prime Rate Prediction

Prime Rate Forecast

As of right now, our odds are at 80% (likely) the Federal Open Market Committee (FOMC) will vote to keep the benchmark target range for the fed funds rate at  5.25% - 5.50% at the September 20^TH, 2023 monetary policy meeting, with the United States Prime Rate (a.k.a Fed Prime Rate) holding at 8.50%.

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The Disinflation Continues

 

Year-on-year, the closely watched Core PCE fell from 4.6% in May, to 4.1% during June, 2023.  It was 4.8% back in June of 2022.

Clear progress has been made on the quest for that 2% Fed comfort zone, but since the current cycle of rate hikes, which began back in March of last year, has been aggressive, a pause is likely, as the Fed doesn't want to risk causing a deep and painful recession.

Stay tuned...

 

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The United States Prime Rate was raised to the current 8.50% on July 26, 2023.

=======

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

======= 

Current Odds

• Current odds the U.S. Prime Rate will continue at 8.50% after the September 20^TH, 2023 FOMC monetary policy meeting: 80% (likely.)
  

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Odds Now At 100% (Certain) The U.S. Prime Rate Will Rise to 8.50% After This Afternoon's FOMC Monetary Policy Meeting

Prime Rate Prediction

Prime Rate Forecast

As of right now, our odds are at 100% (certain) the Federal Open Market Committee (FOMC) will vote to raise the benchmark target range for the fed funds rate to  5.25% - 5.50% at today's monetary policy meeting, with the United States Prime Rate (a.k.a Fed Prime Rate) rising to 8.50%.

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Many economists keep warning that a recession may be in the offing, but working  America and consumer America are in defiance.

Employment remains very strong, while the latest Consumer Confidence reading (for this month) proves that Americans are still spending like...Americans.

Interesting note: Since the beginning of this year, government has been hiring more than any other sector. :o(

Stay tuned...

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

CHART: Job Growth In America
by Sector, So Far In 2023

Chart courtesy: The New York Post

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The United States Prime Rate was raised to the current 8.25% on May 3, 2023.

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

======= 

Current Odds

• Current odds the U.S. Prime Rate will rise to 8.50% after today's FOMC monetary policy meeting: 100% (certain.)
  

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