US Futures Hints at Fed 2015 Rate Hike

Traders are betting the Federal Reserve will wait well into 2015 to raise interest rates after a U.S. government report showed the labor market lost steam even before this month’s government shutdown.

U.S. employers added just 148,000 jobs last month, the report showed.

Fed funds futures contracts rose as traders took that fairly weak reading to mean the Fed would likely raise rates even later than they had expected. The price of the contracts, tied to the Fed’s policy rate target, rises when traders see the Fed taking more time before raising rates.

Futures prices now suggest the Fed will raise rates no earlier than April 2015, giving the probability of an increase in that month about 54 percent, according to CME Group’s Fed Watch, which generates probabilities based on the price of Fed funds futures traded at CME Group Inc’s (CME.O) Chicago Board of Trade.

Before the report, traders were giving a probability of about 59 percent for an April 2015 Fed interest-rate increase.

In September Fed officials unexpectedly decided to stand pat rather than trim their $85 billion-a-month bond-purchase program, saying they needed more confirmation of labor-market improvement before reducing stimulus. They meet again next week.

via Reuters

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