Traders keep expectations for Fed rate cut by July

Feb 7 (Reuters) - Futures contracts tied to the Federal Reserve's policy rate rose on Friday, as traders added to bets the U.S. central bank will need to reduce borrowing costs as soon as July to shore up U.S. economic growth.

A U.S government report showed employers hired more people than expected in January, though benchmark revisions to past-months' job figures suggested labor market gains could slow significantly this year.

“The Fed will remain on hold, there’s nothing here to change their perspective," said Doug Duncan, chief economist at Fannie Mae.

The Fed cut rates three times last year to a target range of 1.5% to 1.75%. Policymakers have signaled they see little reason to change things for the balance of this year, despite uncertainty over the impact on the U.S. economy of the new coronavirus outbreak in China.

Traders for their part have been pricing in a Fed rate cut by mid-year since the epidemic began spreading outside of China last month, triggering businesses to shut operations and governments to restrict travel to prevent the spread.

"Coronavirus is still the thing that can derail us and let’s face it we are playing it day-to-day so we will continue with that game plan I would expect for at least the next couple of weeks," said JJ Kinahan, chief market strategist at TD Ameritrade in Chicago. "If we don’t have any major outbreaks you might be able to say all is clear, let’s go worry about something else." (Reporting by Ann Saphir with reporting by Kate Duguid and Chuck Mikolajczak in New York; Editing by Catherine Evans and Steve Orlofsky)

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