Citi maintains the contrary baseline that the Fed’s next move is a cut rather than a hike, with a 25bp reduction in October followed by further cuts in December and January 2027.
After the Fed's hawkish FOMC meeting in June and major Wall Street firms reversing their easing expectations, Citigroup remains the last holdout, predicting the Fed's next move will be a rate cut rather than a hike, with a baseline scenario of a 25bp cut in October followed by further cuts in December and January 2027. Citigroup's three core arguments include falling oil prices, weakening labor market signals, and core PCE being an outlier.
In the wake of the surprisingly hawkish June FOMC meeting and Wall Street institutions withdrawing their easing expectations, Citigroup bucked the trend by sticking to its rate-cut forecast, based on three arguments: falling oil prices, weakening labor market, and core PCE as an outlier.
As Wall Street firms retreat from easing expectations after the Fed's hawkish surprise, Citi maintains its contrarian baseline: the Fed's next move is a cut, starting with 25bp in October. Citi cites falling oil prices, labor market weakness, and core PCE as an outlier to support its call.
After the June FOMC meeting unexpectedly tilted hawkish and major Wall Street institutions withdrew their easing expectations, Citigroup maintains a contrarian view that a rate cut this year remains highly probable. The baseline scenario is a 25bp cut in October, followed by two more in December and January 2027. Citi’s three core arguments point to falling oil prices eliminating inflation risks, labor market weakening, and core PCE being an outlier.
In the wake of the Fed's unexpected hawkish shift at the June FOMC meeting and major Wall Street firms withdrawing their easing forecasts, Citi stands firm on its contrarian view that the Fed's next move is a rate cut rather than a hike. Their baseline scenario calls for a 25bp cut in October, followed by additional cuts in December 2026 and January 2027, supported by three key arguments: falling oil prices, weakening labor market signals, and core PCE being an 'outlier'.
The Fed's June FOMC meeting unexpectedly turned hawkish, dropping dovish language. Major institutions like Deutsche Bank and Goldman Sachs now expect a rate hike this year, but Citi insists on a rate cut in October, citing falling oil prices and weakening labor market.
A change in the US-Iran Hormuz agreement has raised geopolitical risk, while markets are watching Thursday’s PCE data and Micron earnings. Chip stocks, after reaching record highs, face a pricing test tied to AI narratives, monetary policy, memory stocks, Nvidia capacity and Micron HBM supply.
