Dec 22 (Reuters) - Traders on Friday stuck to the view that the Federal Reserve will start cutting interest rates in March after government data showed price pressures continued to cool last month, bringing the Fed's preferred measure of inflation closer to its 2% goal. Futures contracts tied to the Fed's policy rate reflected bets for a better-than-80% chance of a March start to rate cuts after a government report showed the personal consumption expenditures (PCE) price index increased 2.6% from a year earlier, after rising 2.9% in October.
Last week, after the Fed kept the policy rate in the 5.25%-5.50% range for a third straight month, Fed Chair Jerome Powell signaled the rate-hike campaign that began in March 2022 was probably over and the next question policymakers would turn to was the timing of rate cuts.
Analysts say the rapid cooling in inflation means the central bank will need to reverse course to avoid overly tight policy that could hurt the economy.
"If the numbers continue along this path there’s a good possibility that the Fed will cut rates sooner than expected," said Peter Cardillo, chief market economist at Spartan Capital Securities.
Reporting by Ann Saphir with reporting by Stephen Culp; Editing by Toby Chopra and Chizu Nomiyama
