Citigroup economists adjusted the Federal Reserve's policy expectations after releasing better-than-expected August employment data on Friday. They expect interest rate cuts of 25 basis points three times in 2027; previously, they predicted 25 basis points each for October, December, and January 2027. Andrew Hollenhorst, the bank's chief US economist, said in a research report: “Our anticipated seasonal rise in unemployment has not been repeated, which means there is no urgent reason for the Federal Reserve to cut interest rates.” Citi was one of the institutions with the highest accuracy in predicting the Federal Reserve's policy last year. It predicted that the central bank would cut interest rates by 25 basis points three times, while many large peer institutions expected the Federal Reserve to keep interest rates unchanged at the time. Hollenhorst wrote, “We originally expected this year's data to repeat the remaining seasonal patterns. The unemployment rate will rise during the summer months, which in turn spurs the urgency of cutting interest rates.” According to the report, Citi still expects to cut interest rates next year “based on slowing inflation”; compared to the latest forecast, “the risk is in a two-way balance. If the labor market weakens, or if artificial intelligence market sentiment cools down or the stock market declines, interest rate cuts may arrive early.”

Citigroup economists adjusted the Federal Reserve's policy expectations after releasing better-than-expected August employment data on Friday. They expect interest rate cuts of 25 basis points three times in 2027; previously, they predicted 25 basis points each for October, December, and January 2027. Andrew Hollenhorst, the bank's chief US economist, said in a research report: “Our anticipated seasonal rise in unemployment has not been repeated, which means there is no urgent reason for the Federal Reserve to cut interest rates.” Citi was one of the institutions with the highest accuracy in predicting the Federal Reserve's policy last year. It predicted that the central bank would cut interest rates by 25 basis points three times, while many large peer institutions expected the Federal Reserve to keep interest rates unchanged at the time. Hollenhorst wrote, “We originally expected this year's data to repeat the remaining seasonal patterns. The unemployment rate will rise during the summer months, which in turn spurs the urgency of cutting interest rates.” According to the report, Citi still expects to cut interest rates next year “based on slowing inflation”; compared to the latest forecast, “the risk is in a two-way balance. If the labor market weakens, or if artificial intelligence market sentiment cools down or the stock market declines, interest rate cuts may arrive early.”