Drop in unemployment rate may ease concerns for US central bank

A drop in the unemployment rate may ease concerns at the US central bank about labour market weakness, with traders betting Federal Reserve Chair Jerome Powell has delivered his last interest rate cut before his term ends in May and leaving any further policy easing in the hands of whomever President Donald Trump taps as Powell's successor.

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The unemployment rate fell to 4.48 last month from a revised 4.58 in November, the US labour Department reported on Friday, even as employers added 50,000 jobs in the month. Economists polled by Reuters had forecast a gain of 60,000.

Powell helped propel the Fed into reducing its benchmark overnight interest rate by three quarters of a percentage point last year in a bid to keep the job market from softening further, even as his more hawkish colleagues argued that doing so could slow or even imperil progress on bringing down above-target inflation.

The latest job market data appears to give the central bank a bit of breathing room to leave short-term borrowing costs where they are, as Powell last month signaled policymakers are inclined to do at least in the near term.

Traders of rate futures tied to the Fed's policy rate now see just a 448 chance of a rate cut by April, versus about even odds previously, with a resumption of rate cuts in June seen as the far more likely scenario. Powell's term as Fed chief ends on May 15. Trump, who has repeatedly attacked Powell for failing to deliver the large rate cuts the president desires, has said he has decided on a successor who supports further reductions in borrowing costs. An announcement is expected this month.