August 22, 2018 / 6:16 PM / a month ago

Traders stick to U.S. September rate-hike view after FOMC minutes

NEW YORK (Reuters) - U.S. interest rate futures held steady on Wednesday after the release of the U.S. Federal Reserve’s minutes of its July 31-Aug. 1 policy meeting, signaling traders are sticking with the view that the central bank will raise key borrowing costs next month.

“Many participants suggested that if incoming data continued to support their current economic outlook, it would likely soon be appropriate to take another step in removing policy accommodation,” according to the minutes.

While conflicts between the United States and its major trading partners have raised concerns about the economic expansion, domestic business activity and labor conditions have remained solid to warrant further increases in short-term interest rates, the minutes showed.

“In general, these minutes tilt toward bullish on the economic side,” said Gregory Daco, head of U.S. macroeconomics at Oxford Economics in New York. “We expect two more rate hikes in 2018 with the next one in September.”

At 2:45 p.m. (1845 GMT), federal funds futures FFU8 implied traders saw a 96 percent chance that the Federal Open Market Committee, the Fed’s policy-setting group, will raise overnight bank borrowing costs by a quarter percentage point to 2.00-2.25 percent at its Sept. 25-26 meeting, CME Group’s FedWatch program showed.

Fed funds contracts FFZ8 suggested traders estimated a 66 percent likelihood that the FOMC would increase its rate target range to 2.25-2.50 percent at its Dec. 18-19 meeting.

Reporting by Richard Leong; Editing by James Dalgleish and Steve Orlofsky

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