US RATE FUTURES-Slip as Fed seen focused on inflation

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By Ros Krasny

CHICAGO, June 28 (Reuters) - U.S. short-term interest rate futures extended losses on Thursday after the Federal Open Market Committee kept rates steady, as expected, but kept its focus on the inflation outlook after a two-day meeting.

"The take-away point from the Fed statement is that the easing of price pressures thus far has not been sufficient to change the Fed's risk assessment," said Marc Chandler, senior currency strategist at Brown Brothers Harriman in New York.

The implied prospects for a lone rate cut this year FFZ7 sank as low as 15 percent from 22 percent before the end of the FOMC deliberations and more than 50 percent on Wednesday.

Perceived chances of a Fed ease have crept up recently on the back of some weak housing and durable goods data and worries about continued fallout from woes in the subprime mortgage sector, which caters to borrowers with poor credit.

In Thursday's statement the FOMC dropped its characterization of core inflation as "elevated," a move that some analysts had anticipated as a precursor to a possible rate cut later this year.

At the same time, policy-makers said that a "sustained moderation" in inflation has yet to be convincingly shown, suggesting to dealers that the shift in wording did not reflect a sea-change in the Fed's thinking.

"What they give with one hand, they take away with the other. The net change in their position is therefore trivial," said Ian Shepherdson, chief U.S. economist with High Frequency Economics in Valhalla, New York.

The Fed left the federal funds rate at 5.25 percent, where the benchmark overnight lending rate has been since June 2006.