CBOT Fed Watch - January 31 Market Close

In advance of next week's Federal Open Market Committee meeting on February 1-2, 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 January 31 market close, the CBOT 30-Day Federal Funds futures contract for the February 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 2-1/4 percent to 2-1/2 percent at the FOMC meeting on February 2.

In addition, the CBOT 30-Day Federal Funds futures contract is pricing in a 4 percent probability of a further 25-basis point increase in the target rate to 2-3/4 percent (versus a 96 percent probability of just a 25-basis point rate increase).

Summary Table
January 26: 96% for +25 bps versus 4% for +50 bps.
January 27: 96% for +25 bps versus 4% for +50 bps.
January 28: 96% for +25 bps versus 4% for +50 bps.
January 31: 96% for +25 bps versus 4% for +50 bps.
February 1:
February 2: FOMC decision on federal funds target rate.

The information in this document, although taken from sources believed to be reliable, does not constitute investment advice and is not guaranteed by the Chicago Board of Trade as to its accuracy or completeness, nor any trading result, and is intended for purposes of information and education only. The Rules and Regulations of the Chicago Board of Trade should be consulted as the authoritative source of all current contract specifications and regulations.