Fed’s Rate Hike Now Expected Later in 2014

Traders of short-term U.S. interest-rate futures on Friday boosted bets that the Federal Reserve will raise short-term borrowing costs later in 2014 after a government report showed the U.S. economy added fewer jobs than expected in August.

Fed funds futures contracts jumped after the U.S. Labor Department reported 169,000 jobs were added last month. Economists had expected a rise of 180,000 jobs. The job count for earlier months was revised lower.

The futures contracts, tied to the Fed’s policy rate target, rise in price when traders see a bigger chance of a later Fed rate hike.

Futures prices suggested traders see only a 44 percent chance of a rate hike in September 2014, down from 53 percent before the report, according to CME Group’s Fed Watch, which generates probabilities based on the price of Fed funds futures traded at the Chicago Board of Trade.

Traders were betting that the Fed could raise rates first at its October 2014 meeting or later.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza