Traders see late 2014 Fed rate hike; most officers don't
US Treasury yields have also climbed sharply as traders price in a quicker end to the low-rate environment that the Fed has kept in place since December 2008.
The Federal Reserve will start raising interest rates as soon as September 2014, bets by futures traders suggested on Friday.
That's months before most Fed officials themselves expect increases to begin.
Traders are pricing in an even chance of a September 2014 rate increase, a 61 percent chance of an October 2014 rate hike, and a 66 percent chance of a December 2014 increase, based on contracts tied to the Fed's target for overnight-borrowing rates between banks, as listed at the CME Group Inc's Chicago Board of Trade.
Fed Chairman Ben Bernanke said on Wednesday that the US unemployment rate is headed down and the central bank is likely to end its massive bond-buying stimulus by the middle of next year as a result.
Before his comments, which came at the close of a two-day Fed policy-setting meeting, traders were pricing in a January 2015 rate hike.
But the Fed's 19 policymakers themselves have not moved forward their own views of the likely timing of a first rate hike. Only four now expect to raise rates in 2014, one fewer than in March, the Fed said on Wednesday. The rest expect the first rate hike in 2015.
US Treasury yields have also climbed sharply as traders price in a quicker end to the low-rate environment that the Fed has kept in place since December 2008
"I think there is a bit of a puzzle here," said Paul Ashworth, chief US economist for Capital Economics. "I suspect most Fed officials are bit puzzled as well."
Bets on the Fed's first rate increase have swung wildly in the past several weeks. As recently as May 20 - two days before Bernanke suggested the Fed could start trimming its USD85 billion monthly asset-purchases in the next several months - traders pegged April 2015 as a likely liftoff for short-term rates.
By May 31, they were pricing in an October 2014 rate hike, but were back to an expectation of a January 2015 increase even after a US government report showed the economy added more jobs than expected in May.
The Fed officials' rate-rise forecasts published Wednesday do not show any specific months but do show that 10 Fed officials see the target interest rate at 1 percent or lower by the end of 2015.
The Fed has kept the rate between zero and 1/4 percent since December 2008.
Earlier Friday, St. Louis Federal Reserve Bank President James Bullard sharply rebuked his colleagues' decision this week to announce a plan to reduce the central bank's bond buying, calling the move premature and worrying the Fed is risking its credibility as a force for price stability.