Citi reverses Fed forecast, now expects December rate hike
Citigroup now expects the Federal Reserve to raise interest rates by 25 basis points in December, after US consumer inflation data for September came in significantly above expectations. The brokerage had previously been the lone holdout forecasting no further rate moves this year.
Citigroup said on Wednesday it now expects the Federal Reserve to raise interest rates by 25 basis points in December, after US consumer inflation data for September came in significantly above expectations.
The brokerage had been the lone holdout forecasting no further Fed rate moves this year, even as financial markets largely anticipated a December hike. Citi said it expects the Fed to hold policy rates steady after the widely expected December increase, with markets pricing in a roughly 94 per cent probability of a hike in the month. The bank does not expect rate cuts to begin until June 2027.
Data released on Tuesday showed September consumer inflation accelerated on surging gasoline costs, and price pressures had expanded beyond energy, raising concerns that underlying inflation could remain sticky.
Rate futures tied to the Fed's policy rate implied a 47.1 per cent chance of a rate hike at the central bank's October 27 to 28 meeting, up from roughly 22 per cent before the inflation data was released, according to CME Group's FedWatch tool.