.comment-link {margin-left:.6em;}

Prime Rate

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

Wednesday, September 20, 2006

No Action on Interest Rates Today: Prime Rate Remains at 8.25%

In keeping with predictions, the Federal Open Market Committee (FOMC) of the Federal Reserve met today and decided to leave interest rates at their present level. Therefore, the benchmark Federal Funds Target Rate will remain at 5.25%, and the Wall Street JournalĀ® Prime Rate (the U.S. Prime Rate) will remain at the current 8.25%.

Once again, today's FOMC vote wasn't unanimous: as he did at the August 8, 2006 FOMC monetary policy meeting, Fifth District Federal Reserve Bank President Dr. Jeffrey M. Lacker did not vote with the pack, instead voting for a 25 basis point increase for the Fed Funds Target Rate today.

Prime Rate Forecast: What's Ahead for the Prime Rate?

The one-two punch of a cooling U.S. economy and easing crude oil prices should keep inflation on the ropes moving forward, so most experts are predicting that the Fed will leave interest rates at their present level for the rest of 2006. In fact, some economists and academics are predicting that the Fed will start to bring interest rates down as early as Q1, 2007.

As of right now, the investors who trade in Fed Funds Futures have odds at about 6% (according to current pricing on contracts) that the FOMC will elect to raise the benchmark Fed Funds Target Rate by 25 basis points at the October 24TH monetary policy meeting.

Simple Summary of the latest Prime Rate Predictions:

  • Current odds that the Prime Rate will rise
    to 8.50% on October 24TH, 2006: 6%

  • NB: Prime Rate = (The Fed Funds Target Rate + 3)

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 (TIP: type the URL www.PrimeRatePredictions.com into your web browser as a shortcut to this blog, or, if you prefer, www.PrimeRateForecast.com).

Here's a clip from the press release that was issued by the FOMC this afternoon:

"The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.

The moderation in economic growth appears to be continuing, partly reflecting a cooling of the housing market.

Readings on core inflation have been elevated, and the high levels of resource utilization and of the prices of energy and other commodities have the potential to sustain inflation pressures. However, inflation pressures seem likely to moderate over time, reflecting reduced impetus from energy prices, contained inflation expectations, and the cumulative effects of monetary policy actions and other factors restraining aggregate demand.

Nonetheless, 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.

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; Frederic S. Mishkin; Sandra Pianalto; Kevin M. Warsh; and Janet L. Yellen. Voting against was Jeffrey M. Lacker, who preferred an increase of 25 basis points in the federal funds rate target at this meeting."

Labels: , ,



Post a Comment

Links to this post:

Create a Link

<< Home

Zero Percent Intro APR Balance Transfer Credit Cards

Entire WebLog (Blog) © 2010 American CyberSpace®

This website is not owned by or affiliated with The Wall Street Journal® or Dow Jones & Company.
Information in this website is provided for educational purposes only. The Prime Rate probabilities
and predictions posted in this blog are not financial recommendations or professional advice, and
should not be interpreted as such. The owners of this website make no warranties with respect to any
and all content contained within this website. Consult a financial professional before making important
decisions related to any investment or loan product, including, but not limited to, business loans,
personal loans, education loans, first or second mortgages, credit cards and car loans.