Citigroup, a major U.S. financial institution, on the 4th pushed back its forecast for the next rate cut by the Federal Reserve to June 2027. Following stronger-than-expected U.S. employment data, views that the labor market remains resilient have strengthened, reducing the need for short-term monetary easing. The company now expects rate cuts of 25 basis points each in June, September, and December of 2027. Previously, it had anticipated rate cuts in October and December of 2026 and January of 2027. According to the August employment report released by the U.S. Bureau of Labor Statistics on the 4th, nonfarm payrolls increased by 162,000, significantly exceeding expectations. In response, the federal funds futures market has seen increased expectations of a Fed rate hike, with the probability of a rate increase at the Federal Open Market Committee meeting scheduled for September 15-16 rising to 61%, up from 52% before the employment report.
Citigroup Inc.Citi's forecast of delayed Fed rate cuts to 2027 implies higher-for-longer rates, which can pressure bank net interest margins and reduce near-term easing benefits.
