Traders expect a slowdown in the pace of Fed rate hikes

The Federal Reserve would further slow its interest rate hikes after a government report on Friday showed wage growth cooled somewhat last month, a sign that last year’s sharp rises are beginning to ease pressure on the economy. rise in prices.

Federal Reserve interest rate futures traders raised bets on Friday that the US central bank will further reduce its pace of rate hikes at its next meeting.

After the report of work DepartmentFed funds futures traders priced at 70% the chance the Fed would raise rates just a quarter of a percentage point at its next meeting on Jan. 31-Feb. 1, versus 30% for a hike. half a point, equal to that of December.

The current target range is 4.25% to 4.5 percent.

Traders have also trimmed bets on further rate hikes, now seeing a slightly more than half chance that the Fed will end its current round of tightening with rates around 5%, based on prices. of interest rate futures.

The figure is below the 5% to 5.25% range that most Federal Reserve policymakers expect, with several of them anticipating that even higher rates will be needed to reduce inflation.

The report showed that median hourly earnings rose 0.3% in December, slower than November’s 0.4%, but also that the unemployment rate fell to 3.5% and that employers added 223,000 jobs, more than marketers expected. analysts.

“The problem is that the labor market remains tight,” said Gary Schlossberg, global strategist at the Wells Fargo Investment Institute. “That has to keep the market guessing as to what it means for inflation and what the Fed does about it.”