FOMC Meeting 28 March 2006

CBOT Fed Watch - March 27 Market Close

In advance of this week's Federal Open Market Committee meeting on March 28, 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 March 27 market close, the CBOT 30-Day Federal Funds futures contract for the April 2006 expiration is currently pricing in a 100 percent probability that the FOMC will increase the target rate by at least 25 basis points from 4-1/2 percent to 4-3/4 percent at tomorrow’s FOMC meeting.

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 5 percent (versus a 96 percent probability of just a 25-basis point rate increase).

This notification concludes this CBOT Fed Watch period. The next scheduled CBOT Fed Watch period will start on Wednesday, May 3, one full week prior to the next scheduled FOMC meeting on May 10.

Summary Table
March 21: 96% for +25 bps versus 4% for +50 bps.
March 22: 96% for +25 bps versus 4% for +50 bps.
March 23: 96% for +25 bps versus 4% for +50 bps.
March 24: 96% for +25 bps versus 4% for +50 bps.
March 27: 96% for +25 bps versus 4% for +50 bps.
March 28: FOMC decision on federal funds target rate.

More info on Fed Days here.

E-mini S&P500 Market Profile at 14:15 (just before Fed Rate announcement):

[1315.50] J
[1315.25] J
[1315.00] J
[1314.75] JK
[1314.50] IJKM
[1314.25] IJKLM
[1314.00] IJKLM
[1313.75] IKLM
[1313.50] IKLM
[1313.25] IKLM
[1313.00] IKL
[1312.75] IL
[1312.50] IL
[1312.25] I
[1312.00] I
[1311.75] I
[1311.50] DI
[1311.25] DI
[1311.00] DEHI
[1310.75] DEFHI
[1310.50] DEFHI
[1310.25] DEFGH
[1310.00] DEFGH
[1309.75] DEFGH
[1309.50] DEFG
[1309.25] DEFG
[1309.00] DEFG
[1308.75] E

Same market at 14:30 (15 minutes - actually more like 12 minutes - after the Fed Rate announcement):

[1315.50] J
[1315.25] J
[1315.00] J
[1314.75] JK
[1314.50] IJKM
[1314.25] IJKLM
[1314.00] IJKLM
[1313.75] IKLM
[1313.50] IKLM
[1313.25] IKLM
[1313.00] IKLM
[1312.75] ILM
[1312.50] ILM
[1312.25] IM
[1312.00] IM
[1311.75] IM
[1311.50] DIM
[1311.25] DIM
[1311.00] DEHIM
[1310.75] DEFHIM
[1310.50] DEFHIM
[1310.25] DEFGHM
[1310.00] DEFGHM
[1309.75] DEFGHM
[1309.50] DEFGM
[1309.25] DEFGM
[1309.00] DEFGM
[1308.75] EM
[1308.50] M
[1308.25] M
[1308.00] M
[1307.75] M
[1307.50] M
[1307.25] M
[1307.00] M
[1306.75] M
[1306.50] M
[1306.25] M
[1306.00] M
[1305.75] M
[1305.50] M
[1305.25] M
[1305.00] M
[1304.75] M

And this is what the final profile looked like at the end of the day. Another FOMC day over.

[1315.50] J
[1315.25] J
[1315.00] J
[1314.75] JK
[1314.50] IJKM
[1314.25] IJKLM
[1314.00] IJKLM
[1313.75] IKLM
[1313.50] IKLM
[1313.25] IKLM
[1313.00] IKLM
[1312.75] ILM
[1312.50] ILM
[1312.25] IM
[1312.00] IM
[1311.75] IM
[1311.50] DIM
[1311.25] DIM
[1311.00] DEHIM
[1310.75] DEFHIM
[1310.50] DEFHIM
[1310.25] DEFGHM
[1310.00] DEFGHM
[1309.75] DEFGHM
[1309.50] DEFGM
[1309.25] DEFGM
[1309.00] DEFGM
[1308.75] EM
[1308.50] M
[1308.25] M
[1308.00] M
[1307.75] M
[1307.50] MN
[1307.25] MN
[1307.00] MN
[1306.75] MN
[1306.50] MN
[1306.25] MN
[1306.00] MNP
[1305.75] MNP
[1305.50] MNP
[1305.25] MNP
[1305.00] MNP
[1304.75] MNP
[1304.50] NP
[1304.25] NP
[1304.00] NP
[1303.75] NP
[1303.50] NPQ
[1303.25] NPQ
[1303.00] PQ
[1302.75] PQR
[1302.50] PQR
[1302.25] PQR
[1302.00] PQR
[1301.75] PQR
[1301.50] PQ
[1301.25] PQ
[1301.00] PQ
[1300.75] PQ
[1300.50] PQ
[1300.25] Q

Text of FOMC statement

Here is the statement released by the Federal Open Market Committee on Tuesday after it raised short-term interest rates by a quarter of a percentage point to 4.75%.

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

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.

In a related action, the Board of Governors approved a 25-basis-point increase in the discount rate to 5-3/4%. In taking this action, the board approved the requests submitted by the boards of directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Dallas, and San Francisco.