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JPMorgan and Citigroup Adjust Predictions for Federal Reserve Interest Rate Cuts
After today’s release of stronger-than-expected employment data, economists at Citigroup Inc. and JPMorgan Chase & Co. have revised their forecasts for the Federal Reserve’s interest rate cuts. Previously among the few to predict a rate cut in July, these financial institutions have now adjusted their expectations.
Citigroup revised its projections following the robust employment data for May, now anticipating that US policymakers will take action in September. On the other hand, JPMorgan does not foresee any changes until November.
Andrew Hollenhorst, Citigroup’s chief U.S. economist, detailed the shift in a recent report, stating, “We are adjusting our primary scenario for the first interest rate cut from July to September.” Despite signs of a slowing labor market and economy, Hollenhorst believes that the Fed’s decision to wait for further data on economic activity and inflation is influenced by last month’s unexpectedly strong employment growth.
Similarly, Michael Feroli, JPMorgan’s chief U.S. economist, suggested in a report that the recent surge in job growth indicates that it may take more than three months for the broader labor market weakening, which the Fed believes could necessitate a rate cut, to materialize.
Citigroup’s updated forecast includes three quarter-point rate cuts in September, November, and December of this year, deviating from their previous forecast of four cuts – one at each Fed policy meeting from July to December. JPMorgan has revised its forecast to anticipate one rate cut this year and one in each quarter next year.
At least six other major Wall Street banks are predicting a rate cut by the Fed in September this week, with at least four predicting the first cut to occur in December.
*Please note that this is not investment advice.
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