(Reuters) - Traders of U.S. short-term interest rate futures on Wednesday kept bets the Federal Reserve will hike just two times next year when Governor Jerome Powell is expected to take over as chairman of the U.S. central bank.
At the close of their two-day meeting, Fed policymakers delivered their third rate hike of the year as was widely expected, and fresh forecasts pointed to the continued conviction of most of them that three more rate hikes will be warranted in 2018.
Traders brushed off that view, giving a March rate hike about a 60 percent probability with another rate hike likely before the end of the year, based on a Reuters analysis of fed funds futures traded at CME Group (NASDAQ:CME) Inc's Chicago Board of Trade. That was little changed from their view before the Fed meeting.
"The market may be a bit too complacent about the pace of rate hikes; it may rise faster than what the market is pricing in," said Neil Sutherland, portfolio manager at Schroders (LON:SDR) in New York.
Two of the Fed's 10 voting members dissented on the rate hike, even as Fed policymakers lifted their growth forecasts for next year as the U.S. nears a deal on a tax plan that Republicans say will rev the country's economic engine.
Last year this time, traders discounted the Fed's view that it would raise rates three times in 2017, as it had increased rates more slowly than it had forecast in the prior two years. But the Fed did follow through with all three of its anticipated rate hikes this year, even though inflation has failed to rise amid what most Fed officials see as a tightening labor market.