Money markets traders stick with views on fed rate hikes

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NEW YORK Aug 31 Traders clung to their views on Monday on the timing of an interest rate increase by the Federal Reserve after Fed Vice Chairman Stanley Fischer's remarks on inflation at a central bankers conference in Jackson Hole, Wyoming on Saturday. U.S. interest rates futures suggested traders see a 28 percent chance the Fed would raise rates at its September 16-17 meeting, unchanged from Friday, according to CME Group's FedWatch program. The Dec federal funds contract implied a 56 percent likelihood of a rate rise, matching late Friday's level.

In a highly anticipated speech, the No. 2 Fed official said domestic inflation will likely rebound as pressure from a strong dollar fades, allowing the U.S. central bank to lift rates gradually. He also cautioned not to overreact to a possible Chinese slowdown following a tumultuous week in global stock markets.

The over-the-counter market signaled traders priced in stronger probabilities of a rate increase by year-end than futures.

In early Monday trading, overnight indexed swap rates implied traders see a 37 percent chance the Fed would raise rates in September and a 78 percent chance for a December rate increase.