Traders see over 50 percent chance on October rate hike

NEW YORK (Reuters) - Traders priced in a more than 1-in-2 chance the U.S. Federal Reserve would raise interest rates in October after Atlanta Federal Reserve President Dennis Lockhart suggested the Fed could consider such a move.

In over-the-counter trading, overnight indexed swap rates implied traders expected a 56 percent chance of an October rate increase, compared with 43 percent on Thursday, Tullett Prebon data showed.

Lockhart, a voting member on the U.S. central bank's policy-setting group this year, told Bloomberg television the October 27-28 meeting of the Federal Open Market Committee is a live one, suggesting policymakers can decide on a rate hike at that meeting.

The prevalent view among analysts has been the FOMC would raise rates either at its upcoming meeting in three weeks or the one in December.

Lockhart said a 50-percent probability at its Sept. 16-17 meeting seems reasonable.

OIS rates, however, indicated lower expectations among traders on a September rate increase at about 37 percent. They implied traders expected a 81 percent chance of a December rate hike, the highest in a week.

(Reporting by Richard Leong; Editing by Dan Grebler)

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