As is known, the Fed did not change interest rates last night at its first Federal Open Market Committee (FOMC) meeting under Chairman Kevin Warsh. The Fed unanimously kept interest rates unchanged at 3.50-3.75%, as expected.
Rising inflation concerns stemming from the conflict between the U.S. and Iran have reduced the chances of the Fed cutting interest rates to nearly zero, while raising the possibility of a rate hike.
However, some major institutions still expect a rate cut. In this regard, Wall Street giant Citi expects the Fed to cut interest rates before the end of the year.
For now, Citi has postponed its forecast for the Fed’s first rate cut to October.
Citigroup had previously expected the Federal Reserve’s first interest rate cut to occur in September, but revised that forecast to October, Reuters reported.
The bank said the Fed’s hawkish stance has increased since Kevin Warsh took over as Fed chairman.
Citi currently expects the Fed to cut interest rates by 25 basis points over three periods: in October and December 2026, and in January 2027.
In addition to Citi, JPMorgan also announced its Fed outlook. As a result, Tai Hui, chief market strategist for Asia at JPMorgan Asset Management, said he expects the Fed to keep interest rates stable in 2026.
Hui said the current view remains that the Fed will be patient with current interest rates and that there will be no interest rate adjustments this year.
“The Fed appears to be trying to be patient with 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 are not yet ripe for the Fed to raise rates, the rationale for raising rates is beginning to emerge.
“If the situation worsens, I think the Fed will be prepared to step in and raise rates,” the economist said. “Unlike the Fed’s response to rising inflation during the pandemic, I think policy action to raise rates could happen more quickly this time, because the Fed is already talking about raising rates.”
*This is not investment advice.
