June 7, 2019 / 12:42 PM / 2 months ago

Traders boost bets on Fed rate cuts, starting in July

June 7 (Reuters) - Traders of U.S. short-term interest rate futures added to bets that the Federal Reserve will start to cut rates in July and reduce them two more times before the end of the year, after a U.S. government report on Friday showed hiring slowed sharply in May.

The sign of cooling in labor markets, on top of worries about the effect of escalating trade tensions on economic growth, pushed up the price of contracts tied to the Fed’s policy rate. The price of the contracts moves in the opposite direction of the expected Fed policy rate at the contract’s maturity.

The move shows traders are becoming increasingly convinced short-term interest rates will end the year at below 1.75%, down from 2.25% to 2.5% now. (Reporting by Ann Saphir Editing by Chizu Nomiyama)

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