Citigroup has pushed back its forecast for the first U.S. interest-rate cut from July to September. The firm now expects three rate cuts totaling 75 basis points this year—down from its prior view of four cuts amounting to 100 basis points.
Citi projects rate reductions of 25 basis points each in September, October, and December 2025. It also foresees two additional 25-basis-point cuts in January and March 2026.
Strong Jobs Data Influences Call
The shift reflects a cooling labor market but also a stronger-than-expected May jobs report. U.S. nonfarm payrolls rose by 139,000 jobs in May, beating the 130,000 consensus estimate. April’s headline gain was revised down to 147,000.
The robust payroll gain has led Citi to conclude that the Federal Reserve will delay easing until later in the year.
Fed Meeting and Market Expectations
The Fed last cut its key rate by 25 basis points in December 2024. It is widely expected to keep rates unchanged at its upcoming policy meeting next week.
Market traders, however, are pricing in two rate cuts by the end of the year, likely totaling around 25 basis points in December.
Optimism Lifts S&P 500 Forecast
On Friday, Citigroup raised its year-end target for the S&P 500 to 6,300 from 5,800. The firm cited stronger corporate earnings and faster growth driven by artificial intelligence.
The benchmark index closed above 6,000 on Friday—the first close at that level since late February.
