The Fed is scheduled to announce its July interest rate decision soon, and the earliest possible date for a rate cut is September. According to FED Watch, the probability of rates remaining unchanged in July is priced at 95.3%, while the probability of a 25 basis point cut at the September 18 meeting is priced at 73.6%.

Citi analysts have also released their updated forecast for rate cuts. According to a Fortune article, Citi US Chief Economist Andrew Hollenhorst and his team expect the Fed to cut rates eight times by 25 basis points each, starting in September 2024.

According to this scenario:

The Fed would cut rates a total of 200 basis points by July 2025, lowering the benchmark interest rate from the current 5.25%-5.5% to 3.25%-3%.

Citi analysts expect rates to remain at 3.25%-3% for the rest of 2025.

The analysts base their optimistic forecast on indicators such as economic slowdown, weakening inflation, rising unemployment, and a negative service sector index. They point out that the economy has cooled considerably from its 2023 peak as inflation continues to slow after an unexpected recession.

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