Analysts from Citi, the American multinational investment bank and financial services corporation, predict the U.S. Federal Reserve will begin reducing rates by September, totaling a 200 basis points (bps) cut over the next eight Federal Open Market Committee (FOMC) meetings. Nevertheless, Federal Reserve Chair Jerome Powell stated on Tuesday that additional progress is required before the Fed can justify a cut to the federal funds rate.
Citi Analysts Predict 8 Weeks of Fed Rate Cuts Starting in September, Powell Seeks Evidence
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Citi Foresees 200bps Cut Over 8 FOMC Meetings
Citi’s analysts foresee the Federal Reserve reducing 200 bps in the next eight meetings starting in Sept. CME’s Fedwatch Tool indicates a 71.8% probability for a 25bps cut and a 3.4% chance for a 50bps cut. Meanwhile, 24.8% of observers believe there will be no changes during the Sept. FOMC meeting.
Citi projects the federal funds rate, currently at 5.25%-5.5%, will drop to around 3.25%-3.5% by the summer of 2025. The bank’s analysts attribute this to sluggish economic growth and a deceleration period. They noted a decline in U.S. services jobs, typically seen around recessions as employers begin reducing labor among the least strongly attached workers.
Powell: Data Doesn’t Bolster the Fed’s Required Confidence in the Inflation Trajectory to Justify Rate Cuts
However, during a Congressional hearing on Tuesday, Federal Reserve Chair Jerome Powell’s statements were less dovish compared to Citi’s predictions. Powell emphasized that more progress is necessary to justify rate cuts, a point he has stressed repeatedly in recent weeks.
“The [central bank] has stated that we do not expect it will be appropriate to reduce the target range for the federal funds rate until we have gained greater confidence that inflation is moving sustainably toward 2%,” Powell said. “The most recent inflation readings, however, have shown some modest further progress, and more good data would strengthen our confidence that inflation is moving sustainably toward 2%.”
As the debate over the direction of U.S. interest rates continues, market participants and policymakers alike find themselves at a crossroads between hopeful projections and cautious realism. While Citi’s analysts outline a clear path for substantial easing, Powell underscores the contingent nature of future decisions is dependent on fresh data.
What do you think about the Citi analyst’s predictions and Powell’s recent statements? Share your thoughts and opinions about this subject in the comments section below.
