Golden Finance reports that in the current complex and volatile global economic situation, Citigroup has made the latest forecast on the future direction of the Federal Reserve’s monetary policy. Citigroup predicts that the Federal Reserve will cut interest rates by a total of 50 basis points in January and March 2026.
This prediction was made after the release of the latest US non-farm payroll data for June. As one of the key indicators reflecting the health of the US economy, the non-farm payroll data has a significant impact on the monetary policy decisions of the Federal Reserve. After the release of the non-farm payroll data this time, Citigroup adjusted its expectations for the Fed’s interest rate cut path this year. Currently, Citigroup predicts that the Federal Reserve will cumulatively cut interest rates by 75 basis points in 2025, with specific cuts of 25 basis points each in September, October and December.
Such a prediction made by Citigroup is not groundless. Judging from the current state of the US economy, although the economy maintains a certain degree of resilience at present, potential risks and challenges cannot be ignored. In terms of the labor market, although the employment data has remained stable to a certain extent, the growth rate of employment has slowed down, and there is upward pressure on the unemployment rate. For instance, some industries are facing adjustments in labor demand, and the expansion speed of some emerging industries has fallen short of expectations, resulting in limited job creation. In terms of inflation, although the current inflation level is within a controllable range, it has not yet reached the long-term target of the Federal Reserve, and the uncertainty of economic growth may have a potential impact on inflation. If economic growth further slows down, the contraction on the demand side may put downward pressure on inflation, providing room for the Federal Reserve to implement interest rate cut policies.
Under the background of global economic integration, the US economy is also constrained by external factors. The instability of the international trade situation may affect the export of the United States and the development of related industries, and further impact domestic employment and economic growth. The divergence in global economic growth and the sluggish growth of some major economies will also have a negative impact on the external demand of the US economy. When formulating monetary policy, the Federal Reserve needs to comprehensively consider the domestic and international economic situation in order to maintain stable economic growth, adequate employment and stable prices.
Previously, Citigroup’s expectation for the timing of the Federal Reserve’s interest rate cut also underwent adjustments. On June 7th, influenced by the non-farm payroll report, Citigroup economists postponed the expected time of the next interest rate cut by the Federal Reserve from July to September. At that time, Citigroup believed that the solid performance of the US labor market would enable the Federal Reserve to “temporarily” keep the current interest rate unchanged. However, they also predict that “the slowdown in job growth in the coming months and, more importantly, the rise in the unemployment rate will prompt the Federal Reserve to resume cutting interest rates.” This adjustment to the interest rate cut forecast for 2025 and early 2026 once again demonstrates Citigroup’s close attention and dynamic assessment of the US economic situation.
For the financial market, the direction of the Federal Reserve’s monetary policy is of vital importance. The rise and fall of interest rates directly affect the cost and flow of funds, and thereby have a profound impact on the prices of various assets such as bonds, stocks, and foreign exchange. If the Federal Reserve cuts interest rates in 2025 and early 2026 as Citigroup predicts, the bond market may witness price increases, as bond prices have an inverse relationship with interest rates. In the stock market, interest rate cuts may reduce the financing costs of enterprises, raise their profit expectations, and thereby drive up stock prices. In the foreign exchange market, the US dollar exchange rate may be restrained to a certain extent due to the decline in interest rates, and other currencies may appreciate against the US dollar. Investors need to closely monitor the monetary policy dynamics of the Federal Reserve and the predictive analysis of institutions such as Citigroup, and reasonably adjust their investment portfolios to cope with the risks and opportunities brought about by market changes.
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