-The Federal Reserve is likely done raising interest rates and will pivot to rate cuts by May, traders bet on Friday, after a government report showed U.S. employers slowed hiring last month and the unemployment rate rose, signs tighter policy is putting the brakes on growth.
The chance of a Fed rate hike by January fell to below 20% after the report, from about 30% before the report, based on prices of futures contracts that settle to the Fed policy rate. Pricing now reflects a better-than-even chance of a rate cut by May, against earlier expectations for rate cuts to start in June.
Nonfarm payrolls increased by 150,000 last month, and September job gains were smaller than earlier reported, the Labor Department said Friday. The unemployment rate rose to 3.9%, from 3.8%, and wage growth slowed.
The Fed this week held its policy rate steady at 5.25%-5.50%, and though Fed Chair Jerome Powell said policymakers were not yet confident that was high enough to bring inflation down to the Fed’s 2% target, traders appear are betting on it.
The report “is consistent with the views of the market that the job market and the economy is decelerating and that’s going to keep the Fed on hold and will cause central banks next year to cut rates,” said Jay Hatfield, chief executive officer at Infrastructure Capital Management.
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