(Reuters) - Interest rate futures traders on Thursday piled on bets that the U.S. Federal Reserve would cut interest rates for the third time this year later this month after a purchasing managers survey showed growth in the vast U.S. services sector appears to be stalling.
Federal funds futures contract prices soared across the board after the report from the Institute for Supply Management, the second from the surveying body this week to signal trouble for the American economy. On Tuesday ISM's manufacturing index showed activity in that sector at its weakest in a decade.
The surge in futures prices lifted the implied probability of a 25 basis point rate cut from the Fed at its two-day meeting on Oct. 29 and 30, according to CME Group's FedWatch tool. It showed the likelihood of a cut had risen to 92.5% from 77% on Wednesday.
The Fed, after raising rates nine times from 2015 through last December, has reversed course this year. It cut rates by a quarter percentage point at each of its last two meetings, in what officials have described as a "mid-cycle adjustment."