Traders now betting Fed to wait until 2016 for first rate hike

July 2, 2015 8:59 AM EDT

(Reuters) - U.S. short-term interest-rate futures contracts rose on Thursday as a weaker than expected government report on jobs prompted traders to put on bets the Federal Reserve will wait to raise interest rates until next year.

Futures contracts show that traders now see January as the first Fed meeting when a rate hike is more likely than not, based on CME FedWatch, which tracks expectations using its Fed funds futures contracts.

Traders see just a 49 percent chance of a December rate hike, down from 57 percent just before the report was published. The report showed a drop in the U.S. unemployment rate to 5.3 percent which reflected an exit of workers from the labor force rather than a strengthening of the jobs market.

The Fed has kept short-term rates near zero since December 2008.

(Reporting by Ann Saphir)

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