After the release of the non – farm payroll report on Friday, June 6th, economists at Citigroup postponed the expected time of the next interest rate cut by the Federal Reserve from July to September. Andrew Hollenhorst, Veronica Clark, and Gisela Young of Citigroup wrote in a report that the solid performance of the US labor market will enable the Federal Reserve to “temporarily” keep the current interest rate unchanged.
However, they expect job growth to slow in the coming months, and more importantly, the rising unemployment rate will prompt the Federal Reserve to resume cutting interest rates.
Total Expected Rate Cut
The total expected rate cut remains at 125 basis points, including 25 basis points each in October, December, January, and March next year. This projection aligns with broader market expectations of further rate cuts to support economic growth and manage inflation expectations.
Market and Economic Context
The decision to postpone the rate cut expectation reflects the Federal Reserve’s cautious approach in the face of ongoing economic uncertainties. While the labor market remains robust, concerns about future job growth and potential increases in the unemployment rate are key factors influencing the Fed’s policy decisions.
The Federal Reserve’s next monetary policy meeting is scheduled for mid – June, where it is expected to release the latest forecast data for the US economy.
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