January 4, 2019 / 1:47 PM / 8 months ago

Traders keep bets on no U.S. Fed rate hikes in 2019

FILE PHOTO: A cyclist passes the Federal Reserve building in Washington, DC, U.S., August 22, 2018. REUTERS/Chris Wattie/File Photo

(Reuters) - A government report on Friday showing U.S. employers went on a hiring spree in December did little to quell worries about the nation’s economic prospects among traders of U.S. short-term interest-rate futures.

Despite the upbeat jobs report, traders of contracts tied to the Federal Reserve’s policy rate kept bets the U.S. central bank will not deliver a single rate hike this year and will begin cutting rates next year.

Those bets reflected an expectation that an economy that added 2.6 million jobs last year - far more than in 2017 - is already beginning to sputter.

That hasn’t been the interpretation of Fed officials themselves, who last month signaled they expected two rate hikes this year to keep the economy from getting too hot. But some Fed officials may be having second thoughts.

Cleveland Fed President Loretta Mester, in remarks just before the jobs report, suggested she would consider pausing hikes if inflation does not pick up as she expects it will. Mester is typically on the hawkish end of the policy spectrum at the Fed.

“People are looking for the Fed to stay on hold as they watch for a global growth slowdown,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina.

Additional reporting by April Joyner and Lucia Mutikani; Editing by Franklin Paul and Jeffrey Benkoe

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