Citigroup pushes back Fed rate cut forecast to September

Citigroup pushes back Fed rate cut forecast to September

Citigroup has revised its forecast for Federal Reserve rate cuts, now expecting three 25-basis-point reductions in September, October, and December.

The change from an earlier June start is due to unexpectedly strong US job gains and persistent inflation risks.

The Wall Street brokerage said it still expects signs of a weakening labor market will lead to cuts later this year.

Citigroup updates Fed rate cut timeline

In a note dated April 3, Citigroup revealed its updated timeline for Fed rate cuts.

The brokerage now expects a total of 75 basis points of reductions in September, October, and December.

This is a change from the previous forecast which had anticipated these cuts in June, July, and September.

Brokerage emphasizes on labor market's influence on interest rates

Citigroup has acknowledged that the timing of upcoming data suggests a later start to rate cuts than previously expected.

The brokerage said, We continue to think signs of a weakening labor market will result in cuts later in the year.

This statement highlights their belief that changes in the labor market could influence future decisions about interest rates.

US job growth exceeded expectations in March

US job growth exceeded expectations in March as a healthcare workers' strike ended and temperatures rose.

However, Citigroup warns of increasing downside risks for the labor market due to an ongoing war with Iran.

The brokerage predicts weak hiring will push up the unemployment rate during summer months, similar to trends observed in recent years.