June 7 (Reuters) - Traders of short-term U.S. interest rate futures continued to expect the Federal Reserve to hold rates near zero until early 2015 after a government report on Friday showed the U.S. economy added slightly more jobs than expected in May but the unemployment rate ticked up.
Fed funds futures contracts rose and then quickly fell back again after the report, which showed U.S. employers added 175,000 jobs, just above the median forecast in a Reuters poll. The unemployment rate rose to 7.6 percent, from 7.5 percent.
The Fed has said it will continue buying assets until there is substantial improvement in the labor market outlook.
Futures prices before the report suggested traders saw about a 56 percent chance of a rate hike in January 2015; after the report the figure stood at 57 percent, according to CME Group’s Fed Watch, which generates probabilities based on the price of fed fund futures traded at the Chicago Board of Trade. Traders gave a 49 percent chance of a hike in December 2014.
The Fed has held its target rate for overnight lending between banks near zero since December 2008 and says it plans to keep it there as long as the U.S. unemployment rate remains above 6.5 percent.