Traders pare bets on 2011 Fed hike
US short-term interest rate futures traders pared bets that the Federal Reserve will start raising rates this year after the central bank left rates near zero and reiterated its promise to keep them there for an extended period.
January 27, 2011 / 09:27 IST
US short-term interest rate futures traders pared bets that the Federal Reserve will start raising rates this year after the central bank left rates near zero and reiterated its promise to keep them there for an extended period.
In a statement following its policy-setting meeting, the Fed said that despite signs the recovery was strengthening, high unemployment still justified its USD 600 billion bond-buying program."The economy is improving, but nothing enough to alter the Fed's super-easy monetary policy," said Frank Hsu, director of global fixed income at Fimat in New York. "We don't see any fundamental change in terms of the quantitative easing. The program will continue."While it acknowledged rising commodity prices, the central bank called measures of underlying inflation "somewhat low."Futures traders are now pricing in a 55% chance of an increase in December to the Fed's target rate for overnight lending between banks, trading in fed funds futures at CME Group Inc's Chicago Board of Trade shows.That's down from the 62% chance of a December rate increase that was priced into the contracts before the statement.Traders also pared expectations for a rate increase in January. A rate increase is still fully priced into the contracts by March 2012. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
