Citi analysts anticipate a 1.25% Fed rate cut in 2024 despite the cooling US CPI inflation data and quoting stable core PCE inflation.
The recent US CPI inflation data has reignited debates regarding the potential Fed rate cut in September. Although many experts have reduced their predictions for a 125 basis point rate reduction in 2024, CITI has remained committed to the central bank’s more dovish stance.
Despite the recent cooling inflation figures, which have dismissed concerns regarding the urgency of a 0.5% interest rate cut, analysts are still predicting a gentler landing.
Dovish Fed Rate Cut Plans Predicted by Citi Analysts
Despite the recent inflation data indicating a declining trend, Citi economists have maintained their forecast of a 1.25% Fed rate cut.
Notably, the most recent US CPI data indicated that inflation has decreased to 2.5% year-over-year, lower than the market’s expectations. Furthermore, the Core CPI inflation rate was 3.2%, consistent with market expectations.
These figures have caused Citi to predict that the Federal Open Market Committee (FOMC) will implement a more cautious 25 basis points rate reduction at its forthcoming meeting. It is important to note that Citi’s report indicates that the core PCE inflation, a critical factor in Fed policy decisions, remains consistent.
Nevertheless, Citi economists emphasize in a recent report that the Federal Reserve will continue prioritizing the labor market in its rate-setting decisions. Despite the most recent data, Citi maintains its prediction of 125 basis points in rate reductions for the year, with additional cuts of 50 basis points anticipated in November and December.
This method indicates Citi’s conviction that the Federal Reserve should implement an incremental policy adjustment as it navigates the ongoing inflation concerns and a mixed economic environment.
The market anticipates PPI inflation data in anticipation of the September FOMC meeting.
The financial markets are closely monitoring the upcoming US PPI inflation data, as it has the potential to offer supplementary insights into inflationary pressures.
Market participants are particularly intrigued by the potential impact of these figures on the Fed’s decision to reduce interest rates at the upcoming FOMC meeting.
It is important to note that the Federal Reserve‘s approach to rate adjustments is critical, as it impacts both borrowing costs and broader economic conditions. In other words, the market sentiment is typically amplified by the lower interest rates, which could strengthen the market sentiment.
In the meantime, the US PPI inflation data is anticipated to experience a 0.2% increase in August, following a 0.1% increase in the previous month. Nevertheless, the Core PPI is anticipated to decrease from the 0.3% figure observed in July to 0.2%.
