As is known, the FED did not change interest rates at its first Federal Open Market Committee (FOMC) meeting under the chairmanship of Kevin Warsh last night. The FED unanimously kept the policy interest rate stable at 3.50-3.75 percent, in line with expectations.
Increased inflation concerns stemming from the US-Iran conflict have reduced the likelihood of a Fed interest rate cut to almost zero, while also raising the possibility of an interest rate increase.
However, some leading institutions are still expecting interest rate cuts. In this regard, Wall Street giant Citi predicts that the Fed will cut interest rates sometime this year.
At this point, Citi has postponed its forecast for the Fed’s first interest rate cut to October.
According to Reuters, Citigroup had previously predicted the Federal Reserve’s first interest rate cut would be in September, but has revised this forecast to October.
The bank stated that the Federal Reserve’s hawkish stance has strengthened since Kevin Warsh took office as FED Chairman.
Citi now forecasts that the Fed will cut interest rates by 25 basis points three times: in October and December of 2026, and again in January of 2027.
Besides Citi, JPMorgan also released its Fed forecasts. Accordingly, Tai Hui, Chief Market Strategist for Asia at JPMorgan Asset Management, stated that they expect the Fed to keep interest rates stable in 2026.
Hui stated that the current view remains that the Fed will be patient with current interest rates and that no adjustments will be made to interest rates during the year.
“The Fed appears to be trying to be patient at current interest rate levels. Therefore, I maintain my current view that the Fed will not adjust interest rates this year.”
Finally, Claudia Sam, chief economist at New Century Advisors and a former Fed economist, argues that while the conditions for a Fed interest rate hike are not yet ripe, the justification for raising rates is developing.
The economist stated: “I think the Fed is ready to step in and raise interest rates if the situation worsens. Unlike the Fed’s response to inflation increases during the pandemic, I think this time the policy action towards raising rates could happen more quickly. Because the Fed is already discussing raising interest rates.”
*This is not investment advice.
