Traders keep bets that Fed will hike rates in July 2015
Dec 18 (Reuters) - Traders of short-term U.S. interest-rate futures on Wednesday kept bets that the Federal Reserve will wait to raise rates until July 2015, after the U.S. central bank strengthened its promise to keep rates low despite trimming its bond-buying stimulus.
The Fed, which unexpectedly reduced its monthly rate of bond purchases to $75 billion, promised to keep rates near zero until "well past the time" that the jobless rate falls below 6.5 percent.
That appeared to be enough to convince traders that the Fed will not rush to raise rates even after the bond-buying program has ended. Fed funds futures contracts initially fell after news of the unexpected taper was released, then reversed those losses and gained as the message on rates sank in.
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 suggest the Fed will raise rates no earlier than July 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 July 2015 Fed interest-rate increase about 57 percent.