• Citi economists now project the Federal Reserve will begin cutting interest rates in September, a shift from their previous June forecast.
  • The revision follows stronger-than-expected economic data, including robust employment figures and persistent inflation readings.
  • Markets are adjusting expectations as other major banks weigh in on the timing of monetary policy easing.

A Later Start to Rate Cuts

Citigroup has pushed back its forecast for when the Federal Reserve will begin cutting interest rates, moving from an initial June call to September, according to sources familiar with the bank's latest analysis. The adjustment reflects recent economic indicators that have shown surprising resilience, complicating the path toward monetary policy easing.

Citi's economists cited stronger payroll numbers and sticky inflation data as key factors behind the revision. "The data has simply not cooperated with earlier easing expectations," one analyst noted, speaking on condition of anonymity. Efforts to reach Citi for official comment were unsuccessful by press time.

Market Implications and Reactions

Financial markets have been recalibrating in response to shifting rate-cut timelines. Treasury yields have edged higher, while equity markets show signs of volatility as investors digest the prospect of prolonged higher rates. Without a clear signal from the Fed, uncertainty could weigh on sentiment in the coming months.

Other institutions are also reassessing their projections. Some Wall Street firms have echoed Citi's more cautious stance, while others maintain that cuts could still arrive by mid-year if economic conditions soften. The divergence highlights the challenges in forecasting amid mixed signals.

Economic Context and Outlook

The revision comes amid ongoing debates about the strength of the U.S. economy. Recent GDP growth has outpaced expectations, but concerns linger about inflation's persistence. Fed officials have emphasized a data-dependent approach, leaving room for further adjustments based on incoming reports.

Industry observers note that a September start to rate cuts would align with the Fed's typical cautious pacing. "It's a balancing act between supporting growth and controlling inflation," said a market strategist, who requested anonymity due to firm policies. The timeline could shift again if upcoming data surprises to the downside.

Correction: An earlier version of this article misstated the previous forecast month; it was June, not July.