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Wednesday, November 04, 2009
Fed Futures Signal No Rate Hikes Through June
By Deborah Levine
MarketWatch Pulse
NEW YORK -- Interest-rate futures on Wednesday indicated traders expect the Federal Reserve to keep its target overnight borrowing cost for banks, known as the federal funds rate, at record lows at least until June, after central bank policy makers repeated they expect to keep interest rates low "for an extended period." The April fed funds contract indicated traders expect rates to rise to 0.28% by then, from the current range of zero to a quarter of a percent. Futures for June show traders expect the benchmark rate to be about 0.42% by then. Both are ever so slightly lower than before the Fed's decision came out. 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.
Copyright © 2009 MarketWatch, Inc.
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