Citibank Predicts Fed to Hold Rates in October and December, Resume Cuts by June 2027

Huasheng Finance reports that on September 17, Citibank released a research report stating that the Federal Reserve's 25-basis-point rate hike came as a surprise to officials, as they expect the month-over-month increase in core inflation over the coming months to remain modest, and do not anticipate a significant acceleration in economic growth. The Fed is expected to hold rates steady in October. Contrary to Chair Powell’s characterization of the labor market, recent modest hiring growth and persistently low unemployment are due solely to a rapid decline in labor force participation, not an acceleration in labor demand. The bank expects the Fed to wait for more data after October to assess the impact of the 25-basis-point rate hike, then hold rates steady again in December, when a series of more moderate inflation readings should provide sufficient evidence that inflation is cooling, supporting another pause in rate hikes. As inflation continues to ease, Citibank anticipates the Fed will resume rate cuts in June 2027.