Citi's Updated Monetary Policy Forecast
In a recent analytical report, Citi's economics team has issued a substantial revision to its outlook for the Federal Reserve's future policy trajectory. The bank's analysts have overhauled their assessment framework based on evolving economic data.
Key Projection: A Significantly Delayed Easing Cycle
Citi's revised base case now outlines the following path:
- First Rate Cut: The Fed is expected to initiate its easing cycle with a 25-basis-point cut in October 2026.
- Follow-up Actions: This would be followed by another 25-basis-point reduction in December 2026.
- Cycle Continuation: A third cut of the same magnitude is projected for January 2027.
This timeline suggests an initial easing phase spanning across two calendar years.
A Stark Contrast to Prior Expectations
This revision represents a fundamental shift in Citi's stance. Previously, the bank had forecasted that the Fed would begin cutting rates in September 2024, with additional cuts anticipated in October and December of the same year. The two-year postponement from 2024 to 2026 reflects a reassessment of the U.S. economy's resilience, persistent inflationary pressures, and the potential for the Fed to maintain a restrictive stance for a more extended period.
This adjustment aligns with recent shifts in sentiment from other financial institutions, indicating a broader market repricing of expectations regarding the timing of the Fed's policy pivot.