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

On September 4, Citigroup revised its forecast for the Federal Reserve's next interest-rate cut, pushing it back to June 2027. This decision was prompted by a stronger-than-anticipated U.S. jobs report, which underscored the resilience of the labor market and diminished the urgency for immediate monetary easing. The brokerage no longer anticipates rate cuts in October 2026, December 2026, or January 2027, as previously stated.

Instead, Citigroup now predicts 25-basis-point reductions in June, September, and December of next year, abandoning its earlier calls for cuts in October, December 2026, and January 2027. The change came after the release of data indicating that U.S. employers added 162,000 jobs in August, significantly surpassing expectations. The unemployment rate remained unchanged at 4.1%, while labor force participation surged.

Citigroup's economists Andrew Hollenhorst and Veronica Clark stated in a note that these labor market figures suggested policymakers would perceive employment conditions as broadly stable, shifting their focus toward the inflation outlook. Following the release of this jobs data, market expectations shifted, with Fed funds futures pricing in a 61% probability of a rate hike at the Fed's policy meeting on September 15-16, up from 52% prior to the report.

Investors are now turning their attention to the upcoming CPI and PPI data for additional insights into the Fed's interest-rate trajectory.