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Prime Rate

also known as the Fed, National, U.S. and WSJ Prime Rate

Tuesday, March 07, 2006

The Latest Odds Related to Future Prime Rate Increases

The latest data on the U.S. economy indicate that growth is still moving forward at a good pace. A key report on the nation's employment situation is due to be released on Friday, March 10, and both economists and investors are expecting this report to show that unemployment in the U.S. is still low, and low unemployment will cause The Fed to worry about wage inflation, which in turn increases the likelihood that The Fed will raise rates by another 25 basis points at each of the next 2 Federal Open Market Committee (FOMC) meetings which are scheduled to take place on March 28 and May 10, 2006.

The Latest Odds Related to Future Prime Rate Increases
Investors who trade is Fed Funds Futures now have odds @ a confident 100% (according to current pricing) that The Fed will raise rates by a quarter point on March 28TH, 2006. Odds on another 25 basis point increase by The Fed @ the following FOMC meeting that's scheduled to take place on May 10TH, 2006 have gone from 76% to 79%. In other words, according to current pricing on Fed Funds Futures, the U.S. prime rate (WSJ prime rate) will probably be 8% after May10TH, 2006.

The current published Wall Street JournalĀ® prime rate (U.S. prime rate) is 7.5%, and the consensus throughout the investment and banking communities is that the prime rate will rise to 7.75% when the FOMC meets on March 28TH, 2006.



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