Investing.com -- The Federal Reserve is likely to cut interest rates by the middle of the year, according to Citi analysts, as U.S. inflation shows signs of remaining stubbornly elevated.
Price gains are set to be a key focus for markets this week, particularly when January's personal consumption expenditures price data is released on Thursday.
Recent figures pointed to sticky inflation in the world's largest economy in January, a prospect that has all but extinguished bets that the Fed will move imminently to bring interest rates down from more than two-decade highs. The central bank previously embarked on a tightening campaign designed to ease inflation back down to its 2% target, but prices are still well above this mark.
Meanwhile, in an interview published on Friday, New York Fed President John Williams sounded some caution around the possibility of early rate cuts, saying that the Fed is on track to reduce borrowing costs "later this year."
In a note to clients dated on Friday, the Citi analysts said that a cut in June is their "base case."
"Fed officials reiterated that rate cuts will be done 'carefully' and seem to be taking January inflation data seriously but not literally," the analysts noted.