Wednesday, 19 June 2013

US rate futures traders see first Fed rate hike in early 2015

TRADERS of short-term US interest rate futures do not expect the Federal Reserve to lift its target for short-term borrowing costs until early 2015 after the central bank said on Wednesday it would keep up its bond-buying programme to help the economy.
Fed funds futures contracts added to losses after the Fed issued its statement at the close of its regular two-day policy-setting meeting.
The Fed said it will continue buying assets until there is substantial improvement in the labor market outlook, and said it would keep rates low until unemployment falls to at least 6.5 per cent as long as inflation does not threaten to rise above 2.5 per cent.
Futures prices before the statement suggested traders saw about a 51 per cent chance of a rate hike in January 2015.
After the statement the figure stood at 52 per cent, according to CME Group's Fed Watch, which generates probabilities based on the price of fed fund futures traded at the Chicago Board of Trade. Traders gave a 42 per cent chance of a hike in December 2014.
The Fed has held its target rate for overnight lending between banks near zero since December 2008. -Reuters

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