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Friday, November 06, 2009

Fed Futures Lower Chance Of Rate Hike By Mid-2010

By Deborah Levine

MarketWatch Pulse

NEW YORK -- Interest-rate futures indicated traders pared bets on the Federal Reserve raising its target rate by mid-2010 on Friday after the Labor Department said the economy shed more jobs than expected last month and the unemployment rate rose more than seen to the highest in 26 years. The May fed funds contract indicated traders expect rates to rise to 0.31% by then, compared to a 0.33% rate before the data was released and from the current range of zero to 0.25%. Futures for July show traders expect the benchmark rate to be 0.42% by then, compared to 0.47% before the jobs report. The Fed typically changes rates in 0.25-point increments, but futures contracts settle at the average rate fed funds traded at for the month. Analysts say raising the fed funds rate will come long after the Fed pursues other methods to remove liquidity from the financial system, with many not forecasting rate increases until later in 2010.

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