Traders are betting the Federal Reserve will keep policy easier for longer now that former Treasury Secretary Lawrence Summers is out of the running to succeed Ben Bernanke as chairman of the central bank.
Summers, a former top aide to President Barack Obama, was widely regarded as likely to be more "hawkish" than current Vice Chairwoman Janet Yellen, who was also a candidate and is now deemed the new front-runner. Obama has also said he was considering former Fed vice chairman Donald Kohn to succeed Bernanke, whose second term expires in January.
Traders now give a 55 percent probability of the first rate hike in December 2014 and 68 percent chance in January 2015, according to CME Group's Fed Watch, which generates probabilities based on the price of federal funds futures traded at the Chicago Board of Trade. On Friday, traders saw a better-than-even chance of the first increase in October 2014.
(Read more: Fed taper likely to be announced this week: El-Erian)
Summers' withdrawal on Sunday came in the face of mounting opposition from within Obama's own Democratic Party. On Monday, U.S. short-term interest rate futures rose as traders shifted away from bets on Summers and toward Yellen, seen as a more dovish policymaker.