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The Federal Reserve building in Washington.

Chris Wattie/Reuters

The Federal Reserve is just about done being patient.

That was the view of traders in short-term interest rate futures Friday, after a government report showed U.S. employers sharply slowed hiring in May.

Traders, already anticipating a Fed interest-rate cut in July, now see a 65-per-cent chance the Fed will cut interest rates two more times this year, based on prices in Fed funds futures contracts.

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That would bring the policy rate down to between 1.5 per cent and 1.75 per cent, undoing most of the tightening undertaken by the central bank last year as the U.S. economy strengthened.

The Labor Department report showed 75,000 new jobs created last month, less than half the monthly average this year, a “shocking” number said Mark Grant, chief global strategist at B. Riley FBR Inc.

With a cooling labour market exacerbating mounting worries that escalating trade tensions with Mexico and China will slow U.S. economic growth, “[Friday]’s report certainly supports the case for the Fed to cut interest rates sooner rather than later,” said Russell Price, chief economist at Ameriprise Financial Services in Troy, Mich.

The U.S. central bank raised interest rates four times last year. Policy-makers have since signalled they are on hold for the rest of 2019, saying they will be patient in assessing economic data.

Only one Fed policy-maker, St. Louis Fed President James Bullard, has said outright in recent weeks that he feels the Fed may soon need to cut rates.

Other policy-makers have said they are watching carefully for signs the economy is slowing, but have stopped short of signalling their patience is wearing thin.

The Fed next meets June 18-19 and starting next week policy-makers will observe their regular premeeting moratorium on public speaking while they huddle with staff to analyze the data and debate their next move.

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