Citi turns hawkish on Fed after inflation surprise, expects December rate hike
C•Citigroup expects the Federal Reserve to raise rates by 25 basis points in December after September inflation exceeded expectations. It expects rates to hold steady afterward and does not expect cuts until June 2027.
1. Citi changes forecast
Citigroup said it expects the Federal Reserve to raise interest rates by 25 basis points in December after September U.S. consumer inflation came in significantly above expectations. The brokerage had previously forecast no further Fed rate moves this year.
2. Market rate expectations
Markets priced in a roughly 94% probability of a December hike, while rate futures implied a 47.1% chance of a hike at the Fed’s October 27-28 meeting, up from roughly 22% before the inflation data. September inflation accelerated on surging gasoline costs, with price pressures also expanding beyond energy.
