US RATE FUTURES-Bets rise on Fed rate hikes in early 2010 CHICAGO, July 15 (Reuters) - Bets that the Federal Reserve will start raising interest rates in the first half of 2010 increased were on the rise on Wednesday after the Fed raised its economic projections and U.S. equities markets roared ahead. Futures FFF0 still imply only about a one-in-three chance for the Fed to raise rates to 0.5 percent in December, from the current range of zero to 0.25 percent. Prospects for tighter policy rise steadily after that. "There was a substantial improvement in the Fed's projections for this year," said Cary Leahey, economist at Decision Economics in New York. The first potential Fed rate hike is fully priced for the March 2010 Federal Open Market Committee meeting, and by mid-2010 FFN0 futures are pricing a fed funds rate of 1 percent. In "central tendency" forecasts released with the minutes of its June policy meeting, the Fed raised its 2009 and 2010 GDP forecasts, even while saying that the U.S. economy could take up to six years to resume trend growth. GDP for 2009 was pegged at -1.5 percent to -1.0 percent against the previous range, from April, of -2.0 percent to -1.3 percent. For 2010, growth was forecast at 2.1 to 3.3 percent, up from 2 to 3 percent in April. Still, Richard Franulovich, senior currency strategist at Westpac in New York, said the Fed's cautious verbiage on the long, slow recovery suggested policy changes were not imminent. "It looks like the Fed still has misgivings about the economy. That tells me that it is in no rush to exit its quantitative easing," Franulovich said. The Fed lowered its benchmark lending rate to the current rock-bottom level in December and since then has provided additional support to credit markets and the economy through a string of measures, including the purchase of long-term Treasury securities. In the meeting minutes issued on Wednesday, policy-makers said that the effect of further asset purchases on the economy was uncertain See more: http://www.reuters.com/article/marketsNews/idUSN1535996820090715
