Traders bet Fed will need to slow rate hikes next year

By Ann Saphir

(Reuters) – Traders of U.S. short-term interest-rate futures stuck to bets on Friday that the Federal Reserve will need to slow its pace of rate hikes sharply next year, after a government report showed employers made fewer than expected hires in November.

The addition of just 155,000 jobs last month, less than the 200,000 expected, further entrenches rising doubts in financial markets that the Fed will stick to the three rate hikes it had just a few months ago penciled in for next year.

Doubts about the Fed’s 2019 rate-hike path have also been recently stoked by a sizable stock-market selloff and increased worries about a global slowdown and waning U.S. fiscal stimulus. Recent comments from Fed Chair Jerome Powell about the need to “slow down” when conditions are uncertain have added to skepticism that the Fed can keep raising rates anywhere near the quarterly increases it has delivered for most of the past two years.

Traders of contracts tied to the Fed’s policy rate are pricing in only a single hike next year. Fed policymakers will release fresh forecasts after their next meeting later this month, at which they are widely expected to deliver a fourth and final rate hike for 2018.

“The report is not soft enough to deter a December rate hike but it will contribute to a downward revision in central bankers’ policy guidance for rate hikes in 2019,” said Mohamed El-Erian, chief economic adviser at Allianz (DE:) in Newport Beach, California.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.