Breaking News: Citigroup Analysts Predict Fed Rate Cut After Strong Inflation Data
In a surprising turn of events, Citigroup analysts have revised their US rate cut forecast following the latest US inflation data. They now predict that the Federal Reserve will cut interest rates by 25 basis points at its upcoming meeting next week.
The analysts were initially convinced that the Fed would deliver multiple larger-sized cuts as the job market cools. However, their outlook has shifted due to stronger-than-expected shelter inflation data.
The core Consumer Price Index (CPI) inflation rose by 0.281% month-over-month in June, exceeding expectations. The most surprising component was the owner's equivalent rent (OER), which recorded a 0.50% increase, the strongest reading since January.
While this may suggest a potential resurgence in housing inflation, Citigroup believes it is more likely a temporary blip rather than a long-term trend. Despite the stronger OER data, the analysts argue that core inflation remains slow enough to justify a rate cut.
Citigroup's revised forecast indicates that the Fed is likely to take a more gradual approach to cutting rates, starting with a 25 basis point reduction next week. The labor market will continue to be a major focus for the Fed, with a total of 125 basis points in rate cuts expected this year, including 50 basis points in November and December.
In conclusion, this shift in Citigroup's forecast could have significant implications for the economy and financial markets. If the Fed does indeed cut rates as predicted, it could stimulate economic growth and provide opportunities for investors to capitalize on the changing market conditions. Stay tuned for updates as the situation develops.