Golden Finance reports that renowned financial institution Citigroup has released its latest forecast, expecting the Federal Reserve to cut interest rates by a cumulative 50 basis points in January and March 2026. This prediction was drawn by Citigroup based on an in-depth analysis of the economic situation and monetary policy direction in the United States.
After the release of the non-farm payroll data, Citigroup also adjusted its expectations for the Federal Reserve to cut interest rates this year accordingly. Currently, Citigroup predicts that the Federal Reserve will cut interest rates by 75 basis points in 2025, with specific cuts of 25 basis points each in September, October and December. Previously, there were many uncertainties in the market’s predictions about the direction of the Federal Reserve’s monetary policy. Fluctuations in economic data, changes in inflationary pressure, and the impact of the global economic situation all made the estimates of the timing and extent of the Federal Reserve’s interest rate cuts full of uncertainties. This time, Citigroup has clearly stated its forecast for interest rate cuts in the coming year or so, providing an important reference for market participants.
The monetary policy adjustments of the Federal Reserve have extensive and profound impacts on the global financial market. Interest rates, as an important tool of monetary policy, their rise and fall are directly related to key factors such as borrowing costs, return on investment and market liquidity. If the Federal Reserve cuts interest rates by a cumulative 50 basis points by the beginning of 2026, it will first have an impact on the domestic bond market in the United States. A lower interest rate environment usually prompts bond prices to rise, as the fixed income of bonds appears more attractive against the backdrop of low interest rates, which will attract more investors to flood into the bond market.
For the stock market, interest rate cuts are often regarded as good news. On the one hand, the reduction of financing costs for enterprises helps enhance their profitability, which in turn drives up stock prices. On the other hand, in a low-interest-rate environment, investors may shift their funds from fixed-income assets such as bonds to the stock market in pursuit of higher returns, thereby increasing capital inflows into the stock market and enhancing the overall market valuation.
In the foreign exchange market, the interest rate cut by the Federal Reserve may lead to the depreciation of the US dollar. The decline in interest rates has reduced the returns on holding the US dollar. Investors may seek assets in other currencies, resulting in a decrease in the demand for the US dollar and pushing the exchange rate of the US dollar lower. This may bring certain trade advantages to export-oriented countries because the depreciation of their currencies against the US dollar is conducive to enhancing the price competitiveness of export commodities in the international market.
From the perspective of the global economy, as one of the world’s most important central banks, the adjustment of the Federal Reserve’s monetary policy will trigger a series of chain reactions. Central banks of other countries may adjust their monetary policies accordingly in accordance with the interest rate cut measures of the Federal Reserve to maintain exchange rate stability, control the inflation level or stimulate economic growth.
However, it should be noted that the monetary policy decisions of the Federal Reserve are not set in stone. Their ultimate direction will still depend on the actual performance of the US economic data, including key indicators such as the inflation rate, unemployment rate, and GDP growth. If there are significant fluctuations in future economic data and they deviate from Citigroup’s expectations, the Federal Reserve’s interest rate cut plan may also be adjusted accordingly. All market participants need to continuously monitor the dynamics of economic data and the policy signals of the Federal Reserve in order to adjust their investment strategies and risk management measures in a timely manner.
Related Topics:
