CBOT Fed Watch - August 5 Market Close

In advance of next week's Federal Open Market Committee meeting on August 9, the Chicago Board of Trade will be reporting daily rate change probabilities in the FOMC's federal funds target rate, as indicated by the CBOT 30-Day Federal Funds futures contract. The CBOT 30-Day Federal Funds futures contract is a key benchmark interest rate barometer that reflects the forward overnight effective rate for excess reserves that are traded among commercial banks in the U.S. federal funds market.

Based upon the August 5 market close, the CBOT 30-Day Federal Funds futures contract for the August 2005 expiration is currently pricing in a 100 percent probability that the FOMC will increase the target rate by at least 25 basis points from 3-1/4 percent to 3-1/2 percent at the FOMC meeting on August 9.

In addition, the CBOT 30-Day Federal Funds futures contract is pricing in a 6 percent probability of a further 25-basis point increase in the target rate to 3-3/4 percent (versus a 94 percent probability of just a 25-basis point rate increase).

Summary Table
August 2: 96% for +25 bps versus 4% for +50 bps.
August 3: 96% for +25 bps versus 4% for +50 bps.
August 4: 96% for +25 bps versus 4% for +50 bps.
August 5: 94% for +25 bps versus 6% for +50 bps.
August 8:
August 9: FOMC decision on federal funds target rate.