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Citigroup revises Fed interest rate forecast based on U.S. employment data

2026-09-05 06:48:27
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Citibank significantly delays expectations for the Federal Reserve to cut interest rates

Affected by strong U.S. employment data, Citigroup significantly postponed its expectation for the Federal Reserve to cut interest rates. The bank announced that it expects the Federal Reserve to cut interest rates by its first 25 basis points in June 2027. According to Citigroup's new forecast, the Federal Reserve plans to implement three 25 basis point rate cuts in June, September and December 2027.

Previously, Citigroup had predicted that the Federal Reserve would adjust interest rates in October and December 2026 and January 2027. The revision of expectations was mainly driven by recent strong U.S. employment data. Data showed that non-agricultural employment increased by 162,000 in August, exceeding market expectations, while the unemployment rate stabilized at 4.1%.

Policy focus may shift to inflation outlook

As an institution that has long held a relatively dovish view of the Federal Reserve, Citigroup said that recent economic data may lead policymakers to assess the labor market as generally stable and shift the focus of monetary policy to the inflation outlook.

Citi economists Andrew Hollenhorst and Veronica Clark pointed out in a report that the unemployment rate has remained unchanged and the labor force participation rate has rebounded significantly. [TAG

Market interest rate expectations changed accordingly

Expectations for the Fed shifted with the release of strong jobs data. According to federal funds futures data, the probability of the Fed raising interest rates at its Sept. 15 - 16 meeting has risen to 61 percent from 52 percent before the jobs report.

Investors are expected to pay close attention to next week's consumer price index (CPI) and producer price index (PPI) data for new signals on the Fed's future interest rate policy.

The above content does not constitute investment advice.

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