(Updates market action, adds Fed officials' views)
By Richard Leong
NEW YORK Jan 6 Traders on Friday expected the
Federal Reserve would raise U.S. interest rates further in 2017
following data that showed a pickup in wage growth in December,
reinforcing the notion inflation is closing in on the Fed's 2
Several Fed officials on Friday spoke of possibly a faster
pace of rate increases with Chicago Fed President Charles Evans
saying three hikes this year are "not going to be implausible."
Average hourly earnings rose 0.4 percent last month,
reversing from a 0.1 percent fall in November. That brought the
year-over-year rise in earnings to 2.9 percent, the biggest
increase since June 2009, government data showed.
The surprisingly strong spike in hourly wages was muted by a
weaker-than-forecast 156,000 rise in nonfarm payrolls.
"We have been waiting for wage growth. We are finally seeing
it," said Jeffrey Cleveland, chief economist at Payden & Rygel
in Los Angeles.
Interest rates futures implied traders see a 69 percent
chance the U.S. central bank will increase the target range on
short-term borrowing costs to at least 0.75-1.00 percent at its
June 13-14 policy meeting. That compared with a 62
percent chance on Thursday, according to CME Group's FedWatch
The futures also implied traders see a 73 percent chance the
Fed will raise its target range to at least 1.00-1.25 percent at
its Dec. 12-13 meeting, up from 67 percent on Thursday,
the CME FedWatch program showed.
The overall solid jobs report came after the Fed this week
released minutes on its Dec. 13-14 meeting where it raised
interest rates by a quarter point due to an improving job market
and expectations of rising inflation.
Fed policymakers thought the economic expansion could
accelerate from the possible tax cuts, federal spending and
looser regulations President-elect Donald Trump and a
Republican-controlled Congress have pledged to implement.
A livelier U.S. economy would allow the Fed to normalize
interest rates as it seeks to raise them further from the
emergency low levels it adopted during the global credit crisis
in December 2008.
The December jobs report was not strong enough to change the
view that the Fed would only raise rates twice in 2017, analysts
Investors and the Fed are awaiting for details on fiscal
stimuli from Trump and Republican lawmakers to evaluate their
boost to business activity and the overall economy.
"It doesn't mean the Fed is behind the curve and they have
to raise rates faster," Cleveland said.
(Reporting by Richard Leong; Editing by Meredith Mazzilli and