Traders add to bets that Fed will hike rates later in 2015

Tue Oct 22, 2013 8:41am EDT

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Oct 22 (Reuters) - Traders of short-term U.S. interest-rate futures on Tuesday boosted bets that the Federal Reserve will wait until well into 2015 to raise rates after a government report showed the U.S. labor market lost steam even before this month's budget battle.

The report, whose release was delayed more than two weeks by the government shutdown, showed U.S. employers added just 148,000 jobs last month.

Fed funds futures contracts rose as traders took those numbers to mean the Fed would likely raise rates even later than they had expected. The price of the contracts, tied to the Fed's policy rate target, rise when traders see the Fed taking more time before raising rates.

Futures prices now suggest the Fed will raise rates no earlier than April 2015, giving the probability of an increase in that month about 52 percent, according to CME Group's Fed Watch, which generates probabilities based on the price of Fed funds futures traded at the Chicago Board of Trade.

Before the report, traders were giving the probability of an April 2015 Fed interest-rate increase about 59 percent.

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