Citigroup delays Fed rate-cut forecast to 2027 after strong U.S. jobs report

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.

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.