Citigroup has just pushed back its forecast for a cut in U.S. benchmark interest rates. The bank had previously expected a rate cut as early as June 2026. It now expects one in September, or even later. 📅
🔍 What’s going on?
Citigroup’s strategists have revised their timeline for U.S. monetary policy. They believe the Fed will keep rates unchanged at least until the fall of 2026.
This shift in direction comes as Jerome Powell and his team are sending increasingly cautious signals. Inflation remains too high for them to let their guard down, and employment data remains strong.
The New York-based bank is thus aligning with an increasingly hawkish consensus in the markets. Other financial institutions have already revised their forecasts in recent weeks.
💡 Why does this matter?
For those of us trading the dollar, this is a major shift. Rates that remain high for longer support the greenback against other currencies. The EUR/USD is currently around 1.1553, but this level could be called into question if the market truly prices in this new pace.
For French traders, this also changes the landscape for risky assets. Tech stocks, emerging markets—anything that normally benefits from monetary easing—could remain under pressure. High U.S. real interest rates are drawing capital and boosting the dollar’s appeal.
📊 Our Take
We believe Citigroup is right to err on the side of caution. The Fed won’t act until inflation has truly subsided.
U.S. macroeconomic data remains too strong to allow for a policy pivot. The job market is holding up, as is consumer spending, and Powell has made it clear: he’d rather wait too long than act too soon. In our view, September 2026 is still an optimistic estimate if inflation starts rising again this summer. The ECB, meanwhile, has already cut rates in 2025 and could continue to do so, widening the transatlantic monetary policy gap. The likely result: a strong dollar and a weak euro.
We expect the EUR/USD to remain under pressure at least through the fall. For French traders: favor short positions in EUR/USD or dollar-denominated assets as long as the Fed maintains its hawkish stance.
✅ Key takeaway
- Citigroup pushes back Fed rate cuts from June to September 2026
- The Fed remains cautious in the face of inflation that is still too high
- The dollar should remain supported by high interest rates for longer
- The EUR/USD could continue to decline given this monetary policy divergence
What do you think? Do you believe the Fed will really hold out until September, or will it cave in sooner under political pressure?
🔎 See also
To learn more, check out all our economic analyses on ActuTrading Economy 📈
Source: Citigroup, Investing.com
