Citigroup delays Fed rate-cut forecast to 2027 after strong U.S. jobs report
TLT•Citigroup pushes back rate-cut forecast
Citigroup on Friday pushed back its forecast for the Federal Reserve's next interest-rate cut to June 2027 after a stronger-than-expected U.S. jobs report reinforced views that the labor market remains resilient and reduced the need for near-term monetary easing.
The brokerage now expects 25-basis-point reductions in June, September and December next year, abandoning its previous call for cuts in October and December 2026 and January 2027.
The move followed data that showed U.S. employers added 162,000 jobs in August, comfortably ahead of expectations, while the unemployment rate held steady at 4.1%.
Citi, a longstanding Fed dove, said the latest labor market data suggested policymakers would view employment conditions as broadly stable and focus instead on the inflation outlook.
"The unemployment rate was unchanged and labor force participation rebounded noticeably," Citi economists Andrew Hollenhorst and Veronica Clark wrote in a note.
Markets turn to inflation data and Fed meeting odds
The jobs data also shifted market expectations, with Fed funds futures pricing in a 61% probability of a rate hike at the central bank's September 15-16 policy meeting, compared with 52% before the report.
Investors will now look to next week's CPI and PPI data for further clues on the Fed's interest-rate path.
