June 14, 2017 / 7:32 PM / 5 months ago

Traders now see next Fed rate hike as soon as March 2018

(Reuters) - U.S. short-term interest rate futures pared earlier gains as Federal Reserve Chair Janet Yellen, following the Fed’s decision to raise rates a second time this year on Wednesday, downplayed recent weakness in inflation and said she believes conditions for it to rise to the Fed’s 2-percent target are in place.

A U.S. five dollar note is seen in this illustration photo June 1, 2017. REUTERS/Thomas White/Illustration

Traders now see March 2018 as the earliest meeting at which the U.S. central bank would next lift its target for overnight borrowing costs, giving it about a 52 percent chance, based on fed funds futures traded at CME Group. Before Yellen began speaking, they had seen June 2018 as the earliest meeting for a next rate hike.

Fed funds futures traders at CME Group had earlier stepped up bets against a third 2017 rate hike after a report showed weaker-than-expected inflation last month.

Reporting by Ann Saphir; editing by Diane Craft

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