Citibank Delays Fed Rate Cut Timeline Amid Hawkish Signals

Huo Xing Finance reports that on June 18, following the Federal Reserve’s latest interest rate decision, Citigroup adjusted its forecast for the Fed’s policy path, delaying the timing of rate cuts by one month overall. Citigroup now expects the Fed to cut rates once each in October and December 2026, and again in January 2027. Previously, Citigroup’s baseline scenario projected consecutive rate cuts in September, October, and December 2026, beginning in September. The report notes that the Fed has initiated a policy review following the appointment of new Chair Kevin Warsh and decided to hold the benchmark rate steady. Amid persistent inflationary pressures, nearly half of policymakers currently anticipate the possibility of another rate hike this year. Citigroup stated in its report that, although Warsh did not explicitly mention it, he likely agrees with the bank’s view that many projections in the dot plot would have been lower had officials been given more time to absorb the recent sharp decline in oil prices. LSEG data shows that traders have largely priced in a 25-basis-point rate hike before October. Citigroup believes that core CPI may continue to weaken between June and August, and the labor market is likely to remain cooling; however, even with improved data, it may still take longer for policymakers to reach consensus on initiating rate cuts.