Citi sees Fed holding rates after 25bp hike, cuts expected in 2027

Citigroup analysts commented on the Federal Reserve's Federal Open Market Committee (FOMC) decision to raise interest rates by 25 basis points, describing the outcome as close to market expectations.

The rate hike was unanimous, and the median "dot plot" indicated one additional 25bp hike projected for this year, according to the Citi analyst note.

Fed Chair Warsh repeated hawkish language while declining to provide guidance on the Fed's reaction function. Warsh's statement that the action "starts to show that we are serious," along with an upward revision to core personal consumption expenditures (PCE) for 2026, were characterized by Citi as modest hawkish surprises.

In its base case, Citi expects the Fed to hold policy rates steady in October, decline to hike in December, and resume rate cuts in June 2027. The firm also noted the possibility of cooler inflation readings between now and the December FOMC meeting, including potential downward revisions to core PCE inflation.

You May Also Be Interested In

• Iambic Therapeutics (IAM) files for proposed IPO
• Citi analysis flags mixed web traffic trends across tech and e-commerce
• Citi reiterates Buy rating on AppLovin with $600 target