Fed's June FOMC Meeting Turns Hawkish
The Federal Reserve's June Federal Open Market Committee (FOMC) meeting took a surprisingly hawkish turn, removing the previous dovish bias from its policy statement. Market expectations for a rate hike quickly intensified. Previously, most Wall Street institutions anticipated a rate cut this year, but after the meeting, major banks such as Deutsche Bank and Goldman Sachs shifted their forecasts to predict a possible rate hike within the year. The outcome marked a sharp contrast to widespread market expectations.
Citi Stands Alone in Dovish View
Amid the wave of hawkish revisions, Citi has become Wall Street's "last holdout." The bank maintains its base case for a rate cut restart in October. Citi analysts argue that current economic data supports easing: first, falling international oil prices are alleviating inflationary pressures; second, rising initial jobless claims signal a weakening labor market that could foreshadow broader economic slowdown; third, recent core PCE data is seen as an outlier rather than a sign of broad inflation, thus not a barrier to rate cuts. Citi therefore believes the Fed could still resume loosening by year-end. This stance makes Citi the only major institution currently expecting a rate cut, standing in stark contrast to the hawkish consensus among its peers.
The divergence between the Fed's hawkish pivot and Citi's persistent dovish outlook underscores the growing uncertainty over the future path of interest rates.