Fed rate increase seen later in 2011

By Reuters
Posted Aug. 6, 2010 at 10:04 a.m.

U.S. short-term interest rate futures traders deferred expectations of a first Federal Reserve rate increase, after a government report showed payrolls fell more than expected in July.

Traders now see just a 20 percent chance the Fed will raise its target rate for overnight lending between banks before to 0.50 percent, from the current range of zero to 0.25 percent, at its June 21-22, 2011 policy-setting meeting, trading in Fed funds futures at the Chicago Board of Trade shows.

Before the report, traders were pricing in about 30 percent chance of a move, based on trading in July expiry Fed funds futures.

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