Citigroup revises its 2025 outlook for US Fed rate cuts from 100 to 75 basis points

Citigroup experts have revised their outlook on the scale and timing of rate cuts in the United States. If previously analysts assumed a reduction in borrowing costs by 100 basis points within four meetings in 2025 starting in July, now they suggest a reduction of only 75 basis points. Moreover, the Federal Reserve (Fed) is likely to take the first step in easing monetary conditions in September instead of July.

The last time the American regulator cut the interest rate was in December 2024. It was reduced by 0.25% back then. In 2025, the Fed maintains a wait-and-see approach, focusing all its attention on incoming economic data.

Citigroup revised its forecast due to the relatively stable US labor market. Employment growth in May was lower than in April, but exceeded analysts' expectations, increasing by 139,000 instead of the predicted 130,000.

In the next meeting on June 18, the Fed is expected to leave rates unchanged, the bank reports. The target level of S&P 500 was raised from 5,800 to 6,300 by December. Citigroup's optimism is caused by the sustainability of corporate earnings and active development of artificial intelligence.