👀 Ones to watch: The MOST undervalued stocks to buy right nowSee Undervalued Stocks

Citi now expects the Fed to cut 125bps by the end of year

Published 08/02/2024, 11:23 AM
Updated 08/02/2024, 11:27 AM
© Reuters.

© Reuters.

US500
-1.11%
IXIC
-1.49%

Citi adjusted its forecast for the Federal Reserve's monetary policy following the release of the July jobs report, which indicated a slower-than-expected growth in employment.

"We now pencil in 50bp rate cuts in September and November, with 25bp cuts at consecutive meetings thereafter to reach a terminal rate of 3-3.25% by mid-2025 (25bp more of cumulative cuts than we had previously)," Citi economists wrote in a note Friday.

The U.S. economy added 114,000 jobs in July, falling short of the anticipated 175,000 jobs and Citi's own estimate of 150,000. The increase in private employment accounted for 97,000 jobs, with government employment contributing an additional 17,000 positions.

Citi's analysis of the employment data suggests that the labor market may be entering a phase of more pronounced weakening. With the recent uptick in unemployment and a discernible slowdown in job creation, Citi anticipates the Fed may start implementing larger rate cuts.

The current policy rates, considered to be in restrictive territory, along with Fed officials' growing attention to employment, support Citi's revised expectations.

Other major Wall Street research players are also changing their Fed forecast models, with Evercore ISI calling for "at least three Fed cuts in 2024."

"Following this report we think the Fed will cut at least three times in 2024 – September, November and December – in a more front-loaded effort to secure the soft landing. Further we think there is now a realistic possibility that the first move will be a 50bp cut in September," they said.

"A 50 in September would become the base case if subsequent data confirms and extends a more marked weakening in the labor market, with a further increase in unemployment and payrolls sub 100,000 in August, JOLTS weakening and layoffs / initial claims moving up."

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads.

Major US indices fell sharply on today's data with both the S&P 500 and Nasdaq Composite index down by more than 2%.

Which stock should you buy in your very next trade?

AI computing powers are changing the stock market. Investing.com's ProPicks AI includes 6 winning stock portfolios chosen by our advanced AI. In 2024 alone, ProPicks AI identified 2 stocks that surged over 150%, 4 additional stocks that leaped over 30%, and 3 more that climbed over 25%. Which stock will be the next to soar?

Unlock ProPicks AI

Latest comments

alan stevensAug 03, 2024, 03:57
Crap stock Crap management Equals crap results !
dylan mulvaneyAug 02, 2024, 21:40
They have been "expecting" rate cuts for 2 years, but they cannot do it because inflation is still out of control, terrible Biden/Harris policies have lead to inflation that is still over 50% above target despite higher rates for 2+ years. If anything, they need to raise rates higher to control inflation, or get Trump back in office.
Meru PetAug 03, 2024, 01:50
resflation is coming 🤔
Jason DillonAug 03, 2024, 21:57
Truflation estimates would disagree with that thesis.
Show all comments
Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.