Citi pushes back Fed rate cut expectations to June 2027 following strong US jobs data

Citigroup has revised its interest rate cut forecast for the US Federal Reserve (Fed) following employment data in the US that exceeded expectations. The bank now expects the Fed to make its next rate cut in June 2027.

Citi had previously predicted that the Fed would cut rates in October and December 2026, and January 2027. According to the new projection, the institution anticipates that the Fed will make three 25-basis-point cuts in June, September, and December of 2027.

The change in forecast came after non-farm payrolls in the US increased by 162 thousand in August, well above expectations, and the unemployment rate remained steady at 4.1 percent. The data was interpreted as a sign that the labor market maintains a resilient outlook and that the need for monetary easing in the short term has diminished.

In a note published by the institution, Citi economists Andrew Hollenhorst and Veronica Clark stated, “The unemployment rate was unchanged and labor force participation recovered significantly.”

The institution noted that the latest employment data could lead Fed officials to view the labor market as generally stable and to focus more on the inflation outlook in their policy assessments.

The strong data was also reflected in interest rate expectations in the markets. In federal funds futures, the probability of the Fed raising interest rates at its September 15-16 monetary policy meeting rose to 61 percent from 52 percent before the employment report.

News Source: 12punto