June 19, 2019 / 3:14 PM / in a month

MONEY MARKETS-U.S. rates futures fall before Fed rate decision

NEW YORK, June 18 (Reuters) - U.S. interest rates futures fell on Wednesday ahead of the Federal Reserve’s meeting when policy-makers could signal they would be open to reduce key borrowing costs later this year amid signs of a slowing global economy.

The Federal Open Market Committee, the U.S. central bank’s rate-setting group, will release its latest policy statement and economic projections at 2 p.m. (1800 GMT), followed by a news conference with Fed Chairman Jerome Powell half hour later.

Traders have piled on bets the Fed would lower interest rates as early as July as trade tensions between the United States, China and other trading partners have exacerbated a softening in global business activities.

At 10:38 a.m. (1438 GMT), federal funds futures implied traders saw a 21% likelihood the Fed would cut the target range on short-term interest rates by a quarter point to 2.00%-2.25% later Wednesday, marginally lower than 22% late on Tuesday, CME Group’s FedWatch program showed.

The implied chance of a rate cut in July was 84%, down slightly from 86% on Tuesday.

The fed funds complex implied traders are pricing in 45% possibility that the Fed would lower short-term rates by 75 basis points by year-end, lower than 49% the day before, according to the CME FedWatch.

“To validate the market pricing, the FOMC would almost have to promise to ease in July,” Amherst Pierpont chief economist Stephen Stanley wrote in a research note. “If the trade negotiations go nowhere, leading to a major tit-for-tat tariffs between the U.S. and China, then the fear is that the economy will sag.”

Reporting by Richard Leong Editing by Bernadette Baum and Nick Zieminski

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