* Fed's latest statement, forecasts less hawkish than
* Futures imply traders pare June rate hike view below 50
(Updates market action after FOMC; adds quote, byline)
By Richard Leong
NEW YORK, March 15 U.S. short-term interest rate
futures rose on Wednesday after the Federal Reserve hinted it
remained on a gradual pace in raising rates, leaving traders to
speculate the U.S. central bank would next increase rates at its
September policy meeting.
The Fed as expected raised U.S. rates by a quarter point to
a range of 0.75 percent to 1.00 percent. Its latest policy
statement and economic forecasts reduced concerns that it has
turned aggressive on ending its easy monetary policy stance.
"They were less hawkish than what the market was
anticipating," said Ninh Chung, head of portfolio management at
SVB Asset Management in San Francisco.
The Federal Open Market Committee, the Fed's policy-setting
group, met on Tuesday and Wednesday. It acknowledged further
improvement in the economy since its preceding meeting.
"The Committee expects that economic conditions will evolve
in a manner that will warrant gradual increases in the federal
funds rate; the federal funds rate is likely to remain, for some
time, below levels that are expected to prevail in the longer
run," the FOMC said.
Federal funds futures implied traders saw a 49 percent
chance the Fed would raise rates again at its June 13-14 meeting
versus 53 percent on Tuesday, CME Group's FedWatch
They suggested traders expected the Fed's next rate hike
will most likely occur in September, where they priced in a 76
percent chance of such a move.
Traders saw a 55 percent chance of a second rate increase
after Wednesday's hike by the Fed's December meeting,
CME's FedWatch program showed.
In the Treasury bill market, T-bill rates retreated from
their highest levels since 2008 set earlier on Wednesday ahead
of the FOMC statement and the reinstatement of the federal debt
ceiling on Thursday.
With the government's borrowing cap at just under $20
trillion, the Treasury Department said it will take steps to
ensure it raises enough cash to meet its interest payments.
Earlier on Wednesday, interest rates on one-month T-bills
reached 0.791 percent, the highest on an intraday
basis since October 2008, Tradeweb data showed.
Three-month T-bill rates hit 0.787 percent,
also the highest since October 2008, while six-month rates
climbed to 0.937 percent, which was the highest
since November 2008, according to EBS Brokertec data.
In late U.S. trading, one-month T-bill rates fell over 8
basis points on the day at 0.6825 percent; three-month rates
declined 5.5 basis points at 0.715 percent and six-month rates
decreased 5.5 basis points at 0.860 percent.
(Additional reporting by Ann Saphir in San Francisco; Editing
by Meredith Mazzilli)