United States Prime Rate

also known as the Fed, National or United States Prime Rate,
from the interest-rate specialists at www.FedPrimeRate.comSM

Wednesday, December 19, 2018

United States Prime Rate Rises to 5.50%

United States Prime Rate Is Now 5.50%
The Federal Open Market Committee (FOMC) of the Federal Reserve has just adjourned its eighth and final monetary policy meeting of 2018, and, in accordance with our forecast, has voted to raise the benchmark target range for the federal funds rate from 2.00% - 2.25% to 2.25% - 2.50%.  Therefore, the United States Prime Rate (a.k.a the Fed Prime Rate) is now 5.50%, effective tomorrow (December 20, 2018.)

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

"...Information received since the Federal Open Market Committee met in November indicates that the labor market has continued to strengthen and that economic activity has been rising at a strong rate. Job gains have been strong, on average, in recent months, and the unemployment rate has remained low. Household spending has continued to grow strongly, while growth of business fixed investment has moderated from its rapid pace earlier in the year. On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Indicators of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee judges that some further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective over the medium term. The Committee judges that risks to the economic outlook are roughly balanced, but will continue to monitor global economic and financial developments and assess their implications for the economic outlook.

In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 2-1/4 to 2‑1/2 percent.

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

Voting for the FOMC monetary policy action were: Jerome H. Powell, Chairman; John C. Williams, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Mary C. Daly; Loretta J. Mester; and Randal K. Quarles..."
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Wednesday, September 26, 2018

United States Prime Rate Rises to 5.25%

United States Prime Rate Is Now 5.25%
The Federal Open Market Committee (FOMC) of the Federal Reserve has just adjourned its sixth monetary policy meeting of 2018, and, in accordance with our forecast, has voted to raise the benchmark target range for the federal funds rate from 1.75% - 2.00% to 2.00% - 2.25%.  Therefore, the United States Prime Rate (a.k.a the Fed Prime Rate) is now 5.25%, effective tomorrow (September 27, 2018.)

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

"...Information received since the Federal Open Market Committee met in August indicates that the labor market has continued to strengthen and that economic activity has been rising at a strong rate. Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low. Household spending and business fixed investment have grown strongly. On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Indicators of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective over the medium term. Risks to the economic outlook appear roughly balanced.

In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 2 to 2-1/4 percent.

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

Voting for the FOMC monetary policy action were: Jerome H. Powell, Chairman; John C. Williams, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Lael Brainard; Richard H. Clarida; Esther L. George; Loretta J. Mester; and Randal K. Quarles..."
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Wednesday, June 13, 2018

United States Prime Rate Rises to 5.00%

United States Prime Rate Is Now 5.00%
The Federal Open Market Committee (FOMC) of the Federal Reserve has just adjourned its fourth monetary policy meeting of 2018, and, in accordance with our forecast, has voted to raise the benchmark target range for the federal funds rate from 1.50% - 1.75% to 1.75% - 2.00%.  Therefore, the United States Prime Rate (a.k.a the Fed Prime Rate) is now 5.00%, effective tomorrow (June 14, 2018.)

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

"...Information received since the Federal Open Market Committee met in May indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate. Job gains have been strong, on average, in recent months, and the unemployment rate has declined. Recent data suggest that growth of household spending has picked up, while business fixed investment has continued to grow strongly. On a 12-month basis, both overall inflation and inflation for items other than food and energy have moved close to 2 percent. Indicators of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective over the medium term. Risks to the economic outlook appear roughly balanced.

In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1-3/4 to 2 percent. The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.

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

Voting for the FOMC monetary policy action were Jerome H. Powell, Chairman; William C. Dudley, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Lael Brainard; Loretta J. Mester; Randal K. Quarles; and John C. Williams..."
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Wednesday, March 21, 2018

United States Prime Rate Rises to 4.75%

U.S. Prime Rate Is Now 4.75%
The Federal Open Market Committee (FOMC) of the Federal Reserve has just adjourned its second monetary policy meeting of 2018, and, in accordance with our latest forecast, has voted to raise the benchmark target range for the federal funds rate from 1.25% - 1.50% to 1.50% - 1.75%.  Therefore, the United States Prime Rate (a.k.a the Fed Prime Rate) is now 4.75%, effective tomorrow (March 22, 2018.)

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

"...Information received since the Federal Open Market Committee met in January indicates that the labor market has continued to strengthen and that economic activity has been rising at a moderate rate. Job gains have been strong in recent months, and the unemployment rate has stayed low. Recent data suggest that growth rates of household spending and business fixed investment have moderated from their strong fourth-quarter readings. On a 12-month basis, both overall inflation and inflation for items other than food and energy have continued to run below 2 percent. Market-based measures of inflation compensation have increased in recent months but remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The economic outlook has strengthened in recent months. The Committee expects that, with further gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace in the medium term and labor market conditions will remain strong. Inflation on a 12-month basis is expected to move up in coming months and to stabilize around the Committee's 2 percent objective over the medium term. Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.

In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1-1/2 to 1-3/4 percent. The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

Voting for the FOMC monetary policy action were Jerome H. Powell, Chairman; William C. Dudley, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Lael Brainard; Loretta J. Mester; Randal K. Quarles; and John C. Williams..."
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Wednesday, December 13, 2017

United States Prime Rate Rises to 4.50%

U.S. Prime Rate Is Now 4.50%
The Federal Open Market Committee (FOMC) of the Federal Reserve has just adjourned its eighth and final monetary policy meeting of 2017, and, in accordance with our latest forecast, has voted to raise the benchmark target range for the federal funds rate from 1.00% - 1.25% to 1.25% - 1.50%.  Therefore, the United States Prime Rate (a.k.a the Fed Prime Rate) is now  4.50%, effective tomorrow (December 14, 2017.)

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

"...Information received since the Federal Open Market Committee met in November indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate. Averaging through hurricane-related fluctuations, job gains have been solid, and the unemployment rate declined further. Household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters. On a 12-month basis, both overall inflation and inflation for items other than food and energy have declined this year and are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Hurricane-related disruptions and rebuilding have affected economic activity, employment, and inflation in recent months but have not materially altered the outlook for the national economy. Consequently, the Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will remain strong. Inflation on a 12‑month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee's 2 percent objective over the medium term. Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.

In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1-1/4 to 1‑1/2 percent. The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

Voting for the FOMC monetary policy action were Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Patrick Harker; Robert S. Kaplan; Jerome H. Powell; and Randal K. Quarles. Voting against the action were Charles L. Evans and Neel Kashkari, who preferred at this meeting to maintain the existing target range for the federal funds rate..."
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Wednesday, June 14, 2017

United States Prime Rate Rises to 4.25%

U.S. Prime Rate Is Now 4.25%
The Federal Open Market Committee (FOMC) of the Federal Reserve has just adjourned its fourth monetary policy meeting of 2017 and, in accordance with our latest forecast, has voted to raise the benchmark target range for the federal funds rate from 0.75% - 1.00% to 1.00% - 1.25%.  Therefore, the United States Prime Rate (a.k.a the Fed or national Prime Rate) is 4.25%, effective tomorrow (June 15, 2017.)

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

"...Information received since the Federal Open Market Committee met in May indicates that the labor market has continued to strengthen and that economic activity has been rising moderately so far this year. Job gains have moderated but have been solid, on average, since the beginning of the year, and the unemployment rate has declined. Household spending has picked up in recent months, and business fixed investment has continued to expand. On a 12-month basis, inflation has declined recently and, like the measure excluding food and energy prices, is running somewhat below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further. Inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee's 2 percent objective over the medium term. Near term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.

In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1 to 1-1/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee currently expects to begin implementing a balance sheet normalization program this year, provided that the economy evolves broadly as anticipated. This program, which would gradually reduce the Federal Reserve's securities holdings by decreasing reinvestment of principal payments from those securities, is described in the accompanying addendum to the Committee's Policy Normalization Principles and Plans.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Patrick Harker; Robert S. Kaplan; and Jerome H. Powell. Voting against the action was Neel Kashkari, who preferred at this meeting to maintain the existing target range for the federal funds rate..."
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Wednesday, March 15, 2017

United States Prime Rate Rises to 4%

U.S. Prime Rate Is Now 4.00%
The Federal Open Market Committee (FOMC) of the Federal Reserve has just adjourned its second monetary policy meeting of 2017 and, in accordance with our latest forecast, has voted to raise the benchmark target range for the federal funds rate from 0.5% - 0.75% to 0.75% - 1.00%.  Therefore, the United States Prime Rate (a.k.a the Fed or national Prime Rate) is 4.00%, effective tomorrow.

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American banks have already started to announce that their Prime Lending Rate is now 4.00%, including:


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

"...Information received since the Federal Open Market Committee met in February indicates that the labor market has continued to strengthen and that economic activity has continued to expand at a moderate pace. Job gains remained solid and the unemployment rate was little changed in recent months. Household spending has continued to rise moderately while business fixed investment appears to have firmed somewhat. Inflation has increased in recent quarters, moving close to the Committee's 2 percent longer-run objective; excluding energy and food prices, inflation was little changed and continued to run somewhat below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, labor market conditions will strengthen somewhat further, and inflation will stabilize around 2 percent over the medium term. Near-term risks to the economic outlook appear roughly balanced. The Committee continues to closely monitor inflation indicators and global economic and financial developments.

In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 3/4 to 1 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Patrick Harker; Robert S. Kaplan; Jerome H. Powell; and Daniel K. Tarullo. Voting against the action was Neel Kashkari, who preferred at this meeting to maintain the existing target range for the federal funds rate..."
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Wednesday, December 14, 2016

United States Prime Rate Rises to 3.75%

U.S. Prime Rate Is Now 3.75%
The Federal Open Market Committee (FOMC) of the Federal Reserve has just adjourned its eighth and final monetary policy meeting of 2016 and, in accordance with our latest forecast, has voted to raise the benchmark target range for the federal funds rate from 0% - 0.25% to 0.5% - 0.75%.  Therefore, the United States Prime Rate (a.k.a the Fed or national Prime Rate) is 3.75%, effective tomorrow.

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American banks have already started to announce that their Prime Lending Rate is now 3.75%, including:

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

"...Information received since the Federal Open Market Committee met in November indicates that the labor market has continued to strengthen and that economic activity has been expanding at a moderate pace since mid-year. Job gains have been solid in recent months and the unemployment rate has declined. Household spending has been rising moderately but business fixed investment has remained soft. Inflation has increased since earlier this year but is still below the Committee's 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation have moved up considerably but still are low; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will strengthen somewhat further. Inflation is expected to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further. Near-term risks to the economic outlook appear roughly balanced. The Committee continues to closely monitor inflation indicators and global economic and financial developments.

In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1/2 to 3/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; James Bullard; Stanley Fischer; Esther L. George; Loretta J. Mester; Jerome H. Powell; Eric Rosengren; and Daniel K. Tarullo..."
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Wednesday, December 16, 2015

U.S. Prime Rate Rises to 3.5%

U.S. Prime Rate Is Now 3.5%
The Federal Open Market Committee (FOMC) of the Federal Reserve has just adjourned its eighth and final monetary policy meeting of 2015 and, as expected, has voted to raise the benchmark target range for the federal funds rate from 0% - 0.25% to 0.25% - 0.5%.  Therefore, the United States Prime Rate (a.k.a the Fed, Wall Street Journal®, national or WSJ Prime Rate) is 3.5%, effective tomorrow.

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American banks have already started to announce that their Prime Rate is now 3.5%, including:

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

"...Information received since the Federal Open Market Committee met in October suggests that economic activity has been expanding at a moderate pace. Household spending and business fixed investment have been increasing at solid rates in recent months, and the housing sector has improved further; however, net exports have been soft. A range of recent labor market indicators, including ongoing job gains and declining unemployment, shows further improvement and confirms that underutilization of labor resources has diminished appreciably since early this year. Inflation has continued to run below the Committee's 2 percent longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation remain low; some survey-based measures of longer-term inflation expectations have edged down.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will continue to expand at a moderate pace and labor market indicators will continue to strengthen. Overall, taking into account domestic and international developments, the Committee sees the risks to the outlook for both economic activity and the labor market as balanced. Inflation is expected to rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further. The Committee continues to monitor inflation developments closely.

The Committee judges that there has been considerable improvement in labor market conditions this year, and it is reasonably confident that inflation will rise, over the medium term, to its 2 percent objective. Given the economic outlook, and recognizing the time it takes for policy actions to affect future economic outcomes, the Committee decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent. The stance of monetary policy remains accommodative after this increase, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Jeffrey M. Lacker; Dennis P. Lockhart; Jerome H. Powell; Daniel K. Tarullo; and John C. Williams..."
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Thursday, June 29, 2006

Prime Rate Increase Today: The Prime Rate Is Now 8.25%

Ladies and gents: borrowing just got more expensive. In accordance with all the reliable interest rate predictions and forecasts, the Federal Open Market Committee (FOMC) of The Federal Reserve has just raised its target for the benchmark Federal Funds Target Rate by 25 basis points (0.25 percentage point) to 5.25%. Therefore, as of this afternoon, the U.S. Prime Rate is now 8.25%. Many American banks have already issued a press release announcing that their prime lending rate has increased from 8.00% to 8.25%, including:

  • The Bank of America*
  • HSBC*
  • Northern Trust*
  • PNC*
  • Harris N.A.*
  • Dollar Bank*
  • National City*
  • Comerica Bank*
  • Wells Fargo*
  • KeyCorp*
  • U.S. Bancorp*
  • M&T Bank*
  • SunTrust*
  • Wachovia*
  • Sky Financial*

The Fed has raised it's target for the Fed Funds Rate by a quarter-point 17 times in a row since June, 2004, and we may be in for another quarter-point increase after the FOMC adjourns their monetary policy meeting on August 8, if, at that time, the Fed isn't comfortable with the pace of inflation.


Prime Rate Prediction: Forecast for The Prime Rate
According to the latest and most authoritative data from the government, U.S. GDP rose by a strong 5.6% in the first-quarter. Nevertheless, consistently high crude oil prices and the higher cost of borrowing have had a cooling effect on the U.S. economy, and this means that the Fed is somewhat less likely to raise rates again in the future. Investors on Wall Street were quite pleased with the language in today's press release, as evidenced by the strong gains made by the 3 major indices today, with the Dow Jones Industrial Average (DJIA) gaining a healthy 217 points.

As of right now, Fed Funds Futures traders have odds at about 62% (according to current pricing on contracts) that the FOMC will elect to raise the benchmark Fed Funds Target Rate by another 25 basis points to 5.50% at the August 8 monetary policy meeting. Prior to today's rate increase, the odds on another quarter-point rate hike on August 8TH were at about 83%.

Simple Summary of the latest Prime Rate predictions:

  • Current odds that the Prime Rate will rise
    to 8.50% on August 8, 2006: 62%

The odds related to Fed Funds Futures contracts--widely accepted as the best predictor of where the FOMC will take the benchmark Fed Funds Target Rate--are continually changing, so stay tuned for the latest odds, especially when The FOMC releases the minutes from today's meeting, which should happen on July 20TH, 2006.


Here's a snippet from the press release that was issued by the Fed earlier this afternoon:

"The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 5-1/4 percent.

Recent indicators suggest that economic growth is moderating from its quite strong pace earlier this year, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices.

Readings on core inflation have been elevated in recent months. Ongoing productivity gains have held down the rise in unit labor costs, and inflation expectations remain contained. However, the high levels of resource utilization and of the prices of energy and other commodities have the potential to sustain inflation pressures.

Although the moderation in the growth of aggregate demand should help to limit inflation pressures over time, the Committee judges that some inflation risks remain. The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information. In any event, the Committee will respond to changes in economic prospects as needed to support the attainment of its objectives.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Jack Guynn; Donald L. Kohn; Randall S. Kroszner; Jeffrey M. Lacker; Sandra Pianalto; Kevin M. Warsh; and Janet L. Yellen."

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Tuesday, June 20, 2006

Prime Rate Increase on June 29 Still Very Likely; Odds On An August 8 Increase Are Rising

Earlier today, the U.S. Commerce Department released the Housing Starts report for May, 2006. The actual number of housing starts for May was higher than Wall Street forecasters were expecting, and now many private and public-sector economists, academics and investors believe that there is an increased likelihood of yet another Prime Rate increase when the Federal Open Market Committee (FOMC) adjourns the monetary policy meeting that's scheduled to take place on August 8, 2006.

The Fed pays close attention to the nation's housing situation; the Fed is now more likely to raise interest rates in an effort to slow the economy and control inflation, because Americans were buying new homes at an unexpectedly high rate in May.


The Latest Prime Rate Predictions for June 29 and August 8

According to current pricing on Federal Funds Futures contracts, investors are still certain that the FOMC will vote to raise the benchmark Fed Funds Target Rate to 5.25% on June 29. The odds on another 0.25 percentage point increase when the FOMC meets on August 8 are now at about 75% as an indirect result of today's housing starts report.

Here's a simple summary of the latest forecasts:

  • Current odds that the Prime Rate will rise
    to 8.25% on June 29, 2006: 100%
  • Current odds that the Prime Rate will rise
    to 8.50% on August 8, 2006: 75%

A friendly reminder of the relationship between the Fed Funds Target Rate and The U.S. Prime Rate:

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


If you plan on borrowing to make a major purchase, now may be a good time to secure the financing, as it looks like the WSJ Prime Rate (the national Prime Rate) is going to hit 8.50% by August 8. Of course, the odds are constantly shifting, so stay tuned for the latest numbers, especially after the government's New Home Sales report on Monday, and the Existing Home Sales report on Tuesday.

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Wednesday, May 10, 2006

Prime Rate Increase Today: U.S. Prime Rate Is Now 8.00%

If you have plans to access money in the near future via an Adjustable Rate Mortgage (ARM), a car loan or a shiny new variable-rate credit card, then we have some news that you should know about: in accordance with all the reliable interest rate predictions and forecasts, the Federal Open Market Committee (FOMC) of The Federal Reserve has just raised its target for the benchmark Federal Funds Target Rate by 25 basis points (0.25 percentage point) to 5.00%. Therefore, as of this afternoon, the U.S. Prime Rate is now 8.00%. Many American banks have already issued a press release announcing that their prime lending rate has increased from 7.75% to 8.00%, including:

  • The Bank of America*
  • Northern Trust*
  • PNC*
  • Harris N.A.*
  • Dollar Bank*
  • National City*
  • Comerica Bank*
  • Wells Fargo*
  • KeyCorp*
  • U.S. Bancorp*
  • M&T Bank*
  • SunTrust*
  • Wachovia*
  • Sky Financial*

The Fed has raised it's target for the Fed Funds Rate 16 times in a row since June, 2004.


Prime Rate Prediction: Forecast for The Prime Rate
The economy has been moving ahead at a strong pace since the start of 2006, so predictions have been quite easy to make, as economists, academics and investors knew that the Fed would raise rates in order to control inflation. Now that certain signals are indicating that the economy may be slowing down, predictions about the Fed's next move related to interest rates will be a bit trickier.

As of right now, Fed Funds Futures traders have odds at about 42% (according to current pricing) that the FOMC will raise the benchmark Fed Funds Target Rate by another 25 basis points when the June 28-29 monetary policy meeting adjourns. Yesterday, Fed Funds Futures traders had odds at 40%.

The odds related to Fed Funds Futures trade are continually changing, so stay tuned for the latest odds, especially when The FOMC releases the minutes from today's meeting, which should happen on May 31st, 2006.


Here's a snippet from the press release that was issued by the Fed moments ago:

"...The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 5 percent.

Economic growth has been quite strong so far this year. The Committee sees growth as likely to moderate to a more sustainable pace, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices.

As yet, the run-up in the prices of energy and other commodities appears to have had only a modest effect on core inflation, ongoing productivity gains have helped to hold the growth of unit labor costs in check, and inflation expectations remain contained. Still, possible increases in resource utilization, in combination with the elevated prices of energy and other commodities, have the potential to add to inflation pressures.

The Committee judges that some further policy firming may yet be needed to address inflation risks but emphasizes that the extent and timing of any such firming will depend importantly on the evolution of the economic outlook as implied by incoming information. In any event, the Committee will respond to changes in economic prospects as needed to support the attainment of its objectives.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Jack Guynn; Donald L. Kohn; Randall S. Kroszner; Jeffrey M. Lacker; Mark W. Olson; Sandra Pianalto; Kevin M. Warsh; and Janet L. Yellen..."

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Tuesday, March 28, 2006

Prime Rate Increase Today: U.S. Prime Rate Is Now 7.75%

Today's rate increase by The Fed comes as no surprise to the business, banking, academic and investment communities, as today's 25 basis point (0.25 percentage point) increase to The Federal Funds Target Rate was fully expected.

The Federal Open Market Committee (FOMC) of The Federal Reserve today voted to raise their Fed Funds Target Rate to 4.75%. Therefore, as of this afternoon, the US Prime Rate is now 7.75%, the highest it's been in 5 years. Many American banks have already issued a press release announcing that their prime lending rate has increased from 7.5% to 7.75%, including:

  • The Bank of America*
  • The Bank of New York*
  • PNC*
  • Comerica Bank*
  • Wells Fargo*
  • Wachovia*
  • KeyCorp*
  • SunTrust*
  • U.S. Bancorp*
  • Sky Financial Group*
  • M&T Bank*

What's Ahead for the Prime Rate
Low unemployment coupled with strong economic growth and high energy prices are all placing inflationary pressure on the nation's economy. High energy costs--and, of course, we are talking about crude oil here--continue to threaten to "pass through" and cause a general price increases for both consumers and producers. Right now, NYMEX crude oil for future delivery is at a staggering $65.94 per barrel, and no one knows when the political tensions in the Middle East and Africa are going to simmer down.

Today was Dr. Ben Bernanke's debut as the FOMC boss, so rate watchers, economists, academics, investors--anyone and everyone with an interest in the U.S. economy--are all scrutinizing the press release that was issued by The Fed today with much fervor. Many rate watchers are going to be pleased about the wording in today's release, as the comments contain language that provides some useful insight as to future interest rate decisions that will be made by the FOMC:

"The Committee judges that some further policy firming may be needed to keep the risks to the attainment of both sustainable economic growth and price stability roughly in balance. In any event, the Committee will respond to changes in economic prospects as needed to foster these objectives."

Yup, good stuff, because the statement about future policy is virtually identical to the one that can be found in the January 31, 2006 FOMC press release when Alan Greenspan was still calling the shots, and I think lots of folks like the idea that Bernanke is probably making an effort to emulate Dr. Greenspan's approach to U.S. economic stewardship.

We can tell by the above language that if the economy continues to move ahead at a healthy pace, and other factors like low unemployment and high energy prices continue to place inflationary pressure on the economy, then we should expect another 25 basis point increase to the Federal Funds Target Rate after the FOMC adjourns on May 10th, 2006; a Fed Funds Rate of 5% after May 10th, 2006, would translate to a national Prime Rate of 8%, because the Prime Rate can be expressed as:

U.S. Prime Rate = The Fed Funds Target Rate + 3


Prime Rate Prediction: The Latest Odds from Fed Funds Futures Traders

The investors who trade in Federal Funds Futures have shifted the odds--according to current pricing--of another quarter point hike to the Fed Funds Rate following today's statement by The FOMC: odds of another 0.25 percentage point increase have gone from 76% to 90%. So, according to current pricing on Federal Funds Futures, we should expect a U.S. Prime Rate of 8% after the FOMC adjourns on May10th, 2006.

The odds related to Fed Funds Futures trade are continually changing, so stay tuned for the latest odds, especially when The FOMC releases the minutes from today's meeting, which should happen on April 18th, 2006.


Here's a snippet from the press release that was issued by The Fed today:

"...The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 4-3/4 percent.

The slowing of the growth of real GDP in the fourth quarter of 2005 seems largely to have reflected temporary or special factors. Economic growth has rebounded strongly in the current quarter but appears likely to moderate to a more sustainable pace. As yet, the run-up in the prices of energy and other commodities appears to have had only a modest effect on core inflation, ongoing productivity gains have helped to hold the growth of unit labor costs in check, and inflation expectations remain contained. Still, possible increases in resource utilization, in combination with the elevated prices of energy and other commodities, have the potential to add to inflation pressures.

The Committee judges that some further policy firming may be needed to keep the risks to the attainment of both sustainable economic growth and price stability roughly in balance. In any event, the Committee will respond to changes in economic prospects as needed to foster these objectives.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Jack Guynn; Donald L. Kohn; Randall S. Kroszner; Jeffrey M. Lacker; Mark W. Olson; Sandra Pianalto; Kevin M. Warsh; and Janet L. Yellen..."

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Tuesday, January 31, 2006

Prime Rate Increase Today: The WSJ Prime Rate Is Now 7.5%

As expected, The Federal Open Market Committee (FOMC) of The Federal Reserve Board has just voted to raise The Federal Funds Rate by 25 basis points (0.25 percentage points) to 4.5%. This means that the de facto Wall Street Journal Prime Rate (the U.S. Prime Rate) is now 7.5%. Many American banks have already released statements announcing that their prime lending rate is now 7.5%, including:

  • The Bank of America*
  • The Bank of New York*
  • Wells Fargo*
  • Wachovia*
  • KeyCorp*
  • SunTrust*
  • Colonial Bank*
  • Sky Financial Group*

Today's rate increase comes as no surprise to economists, bankers and rate watchers, as most have been predicting a quarter point increase from The Fed today. Today's Fed Funds Rate increase-- and subsequent prime rate increase--is the 14th straight bump to these key banking interest rates, and it looks like more rate increases are coming as the year progresses.

Prime Rate Predictions

According to the latest economic data, the economy is doing well, and if the economy continues to do well, then another rate increase is likely, as The Fed will try to cool things down in an effort to stave-off inflation. The Fed is also keenly interested in attaining what's called the "neutral rate" for the Federal Funds Rate: the neutral rate can be described as a Fed Funds Rate that neither encourages nor curtails U.S. economic growth. Most economist believe that with the current Fed Funds Rate of 4.5%, we aren't quite @ "neutral" yet, so at least one more 0.25 percentage point increase should be expected.

The majority of economists who responded to a recent poll are predicting that The Fed Funds Rate will be bumped up to 4.75% by the end of June, 2006, and that it will remain @ 4.75 for the rest of 2006. Since the prime rate can be expressed as:

U.S. Prime Rate = The Fed Funds Target Rate + 3

then, according to the latest predictions, the WSJ Prime Rate should hit 7.75% by mid-summer and stay @ 7.75% for the rest of the year.

A minority of the folks who deal in government securities that are associated with The Fed are predicting that The Fed will raise The Fed Funds Rate to 5% by the end of 2006.

Of course, there are many, continually shifting variables that have an effect on The Fed's interest rate strategy, foremost being inflation, but there are also many other important measures of the U.S. economy that The Fed watches closely. And let's not forget that a new Fed Chairman taking is over tomorrow--so prime rate predictions should always be viewed with a skeptical eye.

Alan Greenspan Exits As Ben Bernanke Is Confirmed As The New Fed Chairman

Alan Greenspan leaves his post as Fed Chairman today as a banking celebrity (there are even rock songs that invoke his name!) and it's no surprise if you think about it.

The economy is cyclical, so there will always be periods of economic growth, followed by periods of economic sluggishness, then growth again, and so on ad infinitum. As Chairman of The Federal Reserve Board, Dr. Greenspan was in charge of U.S. monetary policy during America's longest sustained economic expansion of the postwar period, and that is nothing to sneeze at. Greenspan should be proud of his accomplishments--no doubt--but we should also keep the other side of the coin in mind: how much credit can we bestow on Greenspan when in fact his only real power was controlling banking interest rates? Was the expansion of the 90's a bad thing, since e.g. many of those billion-dollar-burn-rate, dotcom companies ended up going nowhere? Did Greenspan & Co. set interest rates too low, creating a massive real estate bubble that will end up hurting American consumers in the long term? Did low interest rates help to turn Americans into borrow-crazy consumers with little or no savings?

I personally think that Alan Greenspan did a good job, especially the way he handled the country's banking situation after the 911 attacks. To put things into perspective, check out the way interest rates were going in the early 80's before Greenspan took over: not a pretty picture! The way I see it, Greenspan could have done much worse, and that is the bottom line.

Greenspan will now go back to economic consulting, which is what he was doing before going into public service; the latest (unconfirmed) buzz is that Greenspan's new consulting firm will be called Greenspan Associates. I think it's safe to write that, as a consultant, Greenspan will charge whatever he wants for his services, and he'll get it.

Ben Bernanke was confirmed to take over as The Fed Chairman today, and I wish him well; officially, Bernanke will take the helm tomorrow morning. Bernanke steps up to the plate with excellent credentials so I doubt that Americans have anything to worry about. Many would rather just clone Greenspan and give the facsimile two terms as Fed chief; just nervousness about a new face, that's all.

The next FOMC meeting--which will be the first with Ben Bernanke calling the shots--will take place on March 28, 2006, and, as of right now, most experts are predicting another 0.25 percentage point increase to The Fed Funds Rate (which would translate to a 0.25 percentage point increase to the WSJ Prime Rate.) Stay tuned to the Prime Rate Blog as I'll be posting the latest buzz about prime rate predictions between now and the end of March.

Here's a snippet from today's press release issued by The Fed:

"The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 4-1/2 percent.

Although recent economic data have been uneven, the expansion in economic activity appears solid. Core inflation has stayed relatively low in recent months and longer-term inflation expectations remain contained. Nevertheless, possible increases in resource utilization as well as elevated energy prices have the potential to add to inflation pressures.

The Committee judges that some further policy firming may be needed to keep the risks to the attainment of both sustainable economic growth and price stability roughly in balance. In any event, the Committee will respond to changes in economic prospects as needed to foster these objectives.

Voting for the FOMC monetary policy action were: Alan Greenspan, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Roger W. Ferguson, Jr.; Jack Guynn; Donald L. Kohn; Jeffrey M. Lacker; Mark W. Olson; Sandra Pianalto; and Janet L. Yellen."

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Tuesday, November 01, 2005

Fed Funds Rate Goes Up Another 25 Basis Points; The Published WSJ Prime Rate Set To Do The Same

Today, The Fed decided to continue with their incremental rate raising strategy and raised the Fed Funds Rate (FFR) by 25 basis points (or 0.25 percentage points) to 4.0%. This is the 12th consecutive 25 basis point increase of the FFR, and the Fed probably won't stop raising the FFR until the so called "neutral" rate is reached (intelligent guesstimates have the neutral centered @ 4.5%.), so you can expect another 25 basis point increase when the Federal Open Market Committee (FOMC) meets again in December.

Fuel prices are still relatively high, and hurricane season won't be over until the end of November(!) But the economy is still doing OK, growing by an estimated 3.8% in the 3rd quarter, so today's increase didn't meet any resistance by any of the FOMC members.

Within a day or two, the published Wall Street Journal Prime Rate will go up by 25 basis points to an even 7%. Another 25 basis point increase to the published prime rate is expected after the Fed meets in December.

Here's a snippet from a press release issued by the FOMC today:

"The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 4 percent.

Elevated energy prices and hurricane-related disruptions in economic activity have temporarily depressed output and employment. However, monetary policy accommodation, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity that will likely be augmented by planned rebuilding in the hurricane-affected areas. The cumulative rise in energy and other costs has the potential to add to inflation pressures; however, core inflation has been relatively low in recent months and longer-term inflation expectations remain contained.

The Committee perceives that, with appropriate monetary policy action, the upside and downside risks to the attainment of both sustainable growth and price stability should be kept roughly equal. With underlying inflation expected to be contained, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured. Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability.

Voting for the FOMC monetary policy action were: Alan Greenspan, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Roger W. Ferguson, Jr.; Richard W. Fisher; Donald L. Kohn; Michael H. Moskow; Mark W. Olson; Anthony M. Santomero; and Gary H. Stern."

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Wednesday, September 21, 2005

Rate Hike: WSJ Prime Rate Goes Up By 0.25 Percentage Points Despite Fuel Prices, A Dismal Jobs Outlook and Hurricane Woes

Lots of folks down South are hurting due to the devastation wrought by Hurricane Katrina. With Hurricane Rita now churning and building strength in the Gulf and higher fuel prices across the country, many experts were predicting that The Fed would give their rate hike strategy a rest. After all, lots of people are going to need to borrow funds in order to rebuild their homes and businesses. And high fuel costs are putting an extra strain on a wartime economy.

But The Fed, in all their inflation-curbing wisdom, decided to stick to their proverbial guns and raise rates again (Board member Mark W. Olson was the only person to vote for no change to the fed funds target rate at the September 20, 2005 FOMC meeting--That's how I would have voted!) Let's hope they're right about this increase, because the economy isn't looking that great to me! Personal debt is at an all time high and the economy is expected to lose 400,000 jobs within the next 4 months. Hurricanes, debt, fuel prices, jobs, wars...and now a rate hike. Only time will tell if increasing the cost of money was a good move for the America of fall, 2005.

Within the next day or so, the US Prime Rate will rise by 25 basis points to 6.75%. The corresponding Fed Funds Target Rate is now 3.75%. Here's a piece of the Federal Open Market Committee's * press release:

The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 3-3/4 percent.

Output appeared poised to continue growing at a good pace before the tragic toll of Hurricane Katrina. The widespread devastation in the Gulf region, the associated dislocation of economic activity, and the boost to energy prices imply that spending, production, and employment will be set back in the near term. In addition to elevating premiums for some energy products, the disruption to the production and refining infrastructure may add to energy price volatility.

While these unfortunate developments have increased uncertainty about near-term economic performance, it is the Committee's view that they do not pose a more persistent threat. Rather, monetary policy accommodation, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity. Higher energy and other costs have the potential to add to inflation pressures. However, core inflation has been relatively low in recent months and longer-term inflation expectations remain contained.

The Committee perceives that, with appropriate monetary policy action, the upside and downside risks to the attainment of both sustainable growth and price stability should be kept roughly equal. With underlying inflation expected to be contained, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured. Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability.

NB1: On Monday, September 19, 2005, the cost for a barrel of light sweet crude rose by more than $4, a singular event, as this was the largest price jump to ever occur on a single day for a barrel of the light sweet stuff.

NB2: The Dow Jones Industrial Average fell by just over 76 points in response to the recent Fed rate increase.

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