Markets in 'no doubt' on US rate rise

Traders see it as almost "inevitable" the US Federal Reserve will raise its benchmark interest rate on Wednesday after strong jobs growth.

Markets which track investors' expectations for the key rate give a near 100% likelihood of a rise.

It would be only the third time in a decade that the US central bank has increased rates.

Analysts said the odds strengthened on Friday after figures showed better than expected jobs growth in February.

According to the Bureau of Labor Statistics, US employers added 235,000 new jobs, exceeding economists' forecasts.

'Seals the deal'

Federal Reserve chair Janet Yellen said last week that the central bank could raise rates in March if employment and inflation figures met their expectations.

The Fed increased rates, which have been at near-historic lows since the financial crisis, to a range of 0.5% to 0.75% in December.

The futures market for the key Federal fund interest rate puts the likelihood of a rate rise at between 98% and 100%, according to Bloomberg data.

This level of probability was "about as inevitable as it gets," said Kathleen Brooks, research director at City Index.

"They basically have to hike rates next week because the market expects them to," she added.

Paul Ashworth, chief US economist at Capital Economics, said the number of jobs added in February would "erase any lingering doubts that the Fed might not hike interest rates next week".

The US labour market is "where the Fed wants it to be", which "seals the deal for a rate hike next week", said Gus Faucher, deputy chief economist at PNC.

source: BBC

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