Traders keep bets on no U.S. Fed rate hikes in 2019

Reuters

Published Jan 04, 2019 10:37AM ET

Traders keep bets on no U.S. Fed rate hikes in 2019

By Ann Saphir

(Reuters) - A government report on Friday showing U.S. employers went on a hiring spree in December did little to quell worries about the nation's economic prospects among traders of U.S. short-term interest-rate futures.

Despite the upbeat jobs report, traders of contracts tied to the Federal Reserve's policy rate kept bets the U.S. central bank will not deliver a single rate hike this year and will begin cutting rates next year.

Those bets reflected an expectation that an economy that added 2.6 million jobs last year - far more than in 2017 - is already beginning to sputter.

That hasn't been the interpretation of Fed officials themselves, who last month signaled they expected two rate hikes this year to keep the economy from getting too hot. But some Fed officials may be having second thoughts.

Cleveland Fed President Loretta Mester, in remarks just before the jobs report, suggested she would consider pausing hikes if inflation does not pick up as she expects it will. Mester is typically on the hawkish end of the policy spectrum at the Fed.