Citigroup Adds December Hike to Fed Forecast, Still Expects 2027 Cuts
The bank keeps 2027 rate cuts in its outlook even as it joins traders in pricing a December move.
Published
Citigroup has added a December interest rate increase to its Federal Reserve forecast, while continuing to expect cuts in 2027. The bank shifted its near-term call from no change to a hike earlier the same day.
The move brings Citigroup in line with traders, who had already pushed the probability of a December hike to roughly 90% following a hot inflation reading. It also places the bank alongside a hawkish bloc of Fed officials, including Cleveland Fed president Hammack, Chicago Fed president Goolsbee, and presidents Collins and Musalem, who have called for further tightening.
Hammack said this week that the Fed needs more policy restraint to meet its 2% inflation target, describing business conditions as strong to booming, and said low-income households have shifted from trading down on purchases to deciding which bills to pay. Goolsbee has warned that tariffs and rising oil prices could push the economy toward stagflation, and separately said artificial intelligence is an inflation problem. National Economic Council director Hassett has said a cooling inflation print could allow the Fed to hold rates steady.
Citigroup reported third-quarter profit that beat Wall Street estimates, with trading revenue at its strongest in a decade, even though total revenue of $23.84bn fell short of the $24.20bn forecast. On 2027, Citigroup's view sits closer to that of New York Fed president Williams, who said on October 13 she sees no need for a rate hike that year, than to traders who have been adding bets on three more hikes through 2027. That gap between a near-term hike and an eventual retreat leaves long-dated Treasury yields sensitive to whichever side of the divide the next inflation report favors, with mortgage rates already at a seventh straight weekly high of 7.4%.