Jan 19 (Reuters) - The Federal Reserve won't start cutting interest rates until May, traders of futures contracts that settle to the Fed's policy rate were betting on Friday, as the latest read on consumer sentiment suggested rising optimism and appeared to argue against the need for any earlier rate cut.
Traders had been betting on a March start to Fed rate cuts since late last year, after the Fed policymakers themselves signaled they would probably reduce interest rates in 2024, and economic data showed inflation continues to decline while the labor market cools but remains far from collapse.
On Friday, after a widely watched measure of consumer sentiment rose to its highest level in 2-1/2 years, traders priced in only about a 49% chance of a March rate cut, down from 55% earlier in the day and 77% last week. The probability of a rate cut by May, based on rate-futures pricing, stood at more than 80%.
Reporting by Ann Saphir; editing by Jonathan Oatis
