Yigit Taha OZTURK 
Bank of America, Citigroup, and Goldman Sachs economists revised their predictions for the Fed’s interest rate cuts this year after the stronger-than-expected U.S. December nonfarm payroll data. The unexpectedly high job growth figures have led some Wall Street banks to alter their rate cut expectations.
Previously anticipating two 25-basis-point cuts this year, Bank of America announced it now expects no rate cuts. The bank highlighted the risk of the Fed’s next move being a hike rather than a cut.
Citigroup maintains its forecast of five 25-basis-point rate cuts but shifted the timeline, expecting cuts to start in May rather than January. Meanwhile, Goldman Sachs lowered its forecast to two rate cuts this year, down from three.
Bank of America Insights
Aditya Bhave and his team at Bank of America stated, “Following the robust December nonfarm payroll report, we believe the cutting cycle is over.” They also noted that if core PCE inflation surpasses 3% or inflation expectations rise, the Fed might consider raising rates instead.
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Andrew Hollenhorst and Veronica Clark from Citigroup dismissed concerns about the Fed refraining from cuts or even considering rate hikes this year. They emphasized that while employment is stronger than expected, both price and wage inflation are decreasing, enabling officials to feel comfortable implementing rate cuts.
Led by Jan Hatzius, Goldman Sachs economists projected rate cuts in June and December this year and again in June 2026. However, they revised their previous forecast of cuts in March, June, and September, now estimating a terminal rate of 3.5% – 3.75%.
December Nonfarm Payroll Data Impact
The U.S. December nonfarm payroll figure came in at 256,000, significantly exceeding expectations. This led to a reduction in rate cut expectations, with markets now pricing in just 30 basis points of cuts by the end of 2025. The mid-year cut expectation has been postponed to September.
Since September, the Fed has reduced its policy rate by 100 basis points to the range of 4.25% – 4.5%.
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