By Scott Kanowsky
Investing.com — Investor expectations for a return to aggressive half-point interest rate hikes by the Federal Reserve fell on Friday, data from derivatives marketplace CME showed, after the latest U.S. labor market report indicated that the pace of job growth in the world’s largest economy eased in February.
Estimates of the probability that borrowing costs will be lifted by 50 basis points slipped to around 40%, according to the CME FedWatch Tool, which gauges the likelihood that the U.S. central bank will change its target rate later this month. The chance of a smaller quarter-point increase, meanwhile, rose to just under 60%.
On Thursday, the probabilities for a 50-point and 25-point hike were at 68.3% and 31.7%, respectively.
The U.S. economy continued to create jobs faster than most expected last month, but wage growth slowed and the average worker’s working hours dipped, suggesting that the labor market is indeed starting to cool.
The Labor Department said nonfarm payrolls rose by 311,000 through the middle of the month, well above the 205,000 consensus forecast, but down from a revised 504,000 in January.
While the headline number was above forecasts, key elements of the survey pointed to a slight weakening of the labor market. Average hourly earnings growth slowed to 0.2%, rather than staying at 0.3% as expected, while the average number of hours worked edged down to 34.5 from 34.6.