August 3, 2018 / 2:46 PM / 4 months ago

Traders see two more U.S. rate hikes in 2018 after jobs data

NEW YORK (Reuters) - U.S. interest rates futures held steady on Friday, suggesting traders were sticking with their view the Federal Reserve would raise key overnight borrowing costs twice more in 2018 following a mixed payrolls report for July.

U.S. employers hired 157,000 workers last month, fewer than the 190,000 forecast among analysts polled by Reuters. This was lower than an upwardly adjusted 248,000 for June, the Labor Department said on Friday.

The jobless rate as expected dipped to 3.9 percent from 4 percent, while average hourly earnings rose 0.3 percent, bringing the year-over-year increase to 2.7 percent.

“This report doesn’t change the Fed’s view about the slack in the economy,” said Guy Petcho, global macro portfolio manager at Voya Investment Management based in Atlanta.

On Wednesday, the U.S. central bank left target interest rates unchanged at 1.75 percent to 2.00 percent as it viewed the economy as strong, putting it on track to lift borrowing costs at its Sept. 25-26 policy meeting.

At 10:32 a.m. (1432 GMT), federal funds futures implied traders see a 94 percent chance the U.S. central bank would increase short-term rates to a range of 2.00 percent to 2.25 percent at its September policy meeting, up slightly from 91 percent on Thursday, according to CME Group’s FedWatch.

Fed funds futures signaled traders priced in a 68 percent likelihood the Fed would raise rates to 2.25 percent to 2.50 percent at Dec. 18-19 meeting, virtually unchanged from late on Thursday, CME’s FedWatch showed.

Reporting by Richard Leong; Editing by Meredith Mazzilli

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