Traders keep bets on Fed rate hike later this year

(Reuters) - Traders of U.S. short-term interest rate futures continued to bet on a Federal Reserve rate hike in December after a U.S. government report published on Friday showed solid jobs gains and a rise in wages in October.

Traders now see about a 72 percent chance of a December rate hike, a tad higher than before the report, and pushed up slightly the chances that they see of the Fed raising rates again in 2017.

Fed policymakers met earlier this week but held off raising rates as they wait to see more confirmation from economic data that the economy is strong enough to withstand a slightly tighter stance of monetary policy.

The proximity of the U.S. presidential election, now just four days away, likely also played a role in their decision, though few Fed officials have acknowledged politics as they seek to explain their caution in the face of a strong jobs growth and signs that inflation is beginning to rise.

"The conditions are appropriate for them to raise rates," said Russell Price, senior economist at Ameriprise Financial Services Inc.

Atlanta Fed president Dennis Lockhart on Friday said the jobs report was "satisfactory" and told investors that they should expect gradual increases in interest rates over the next two years.

(Reporting by Ann Saphir with reporting by Herb Lash in New York; Editing by Chizu Nomiyama and Meredith Mazzilli)

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