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MONEY MARKETS-Traders stick with bets on U.S. rate hike in December
November 1, 2017 / 7:08 PM / 23 days ago

MONEY MARKETS-Traders stick with bets on U.S. rate hike in December

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Nov 1 (Reuters) - U.S. short-term interest rate futures were little changed on Wednesday after the Federal Reserve left interest rates unchanged but said economic growth was “solid,” reflecting continued expectation for an interest-rate hike in December.

Traders continued to see the Fed as likely to raise rates one more time next year, probably by June, based on a Reuters analysis of fed funds futures traded at CME Group Inc’s Chicago Board of Trade.

Before the Fed’s latest policy statement, traders saw about an 85 percent chance of a December rate hike and just over a 60 percent chance of further rate hike in June ; those probabilities were little changed immediately after the Fed released its rate decision after a two-day meeting.

“We are very much on track for a December rate hike,” said Eric Stein, co-director of global income group at Eaton Vance in Boston.

Traders shifted the focus on President Donald Trump’s announcement of his nominee for Fed chief on Thursday.

Several news reports said Trump is leaning toward Fed Governor Jerome Powell to succeed Janet Yellen whose term at the central bank’s top post expires in February.

Stanford University economist John Taylor was seen as the other main contender for the job. Bond traders saw Taylor, who favors tighter rules to setting interest rates, as likely to push for a faster pace of rate hikes if he were to lead the central bank.

Trump also considered Yellen; former Fed Governor Kevin Warsh and his economic adviser Gary Cohn.

Moreover, the Bank of England is widely expected to raise interest rates for the first time in a decade on Thursday.

U.K. interest rates market implied traders saw a 87 percent chance British policy-makers would raise policy rates by a quarter point to 0.5 percent, Reuters data showed.

Reporting by Ann Saphir in San Francisco and Richard Leong in New York; Editing by Lisa Shumaker and Chizu Nomiyama

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