Citi Analysts Predicts 1.25% Fed Rate Cut After US CPI Inflation Data

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As a seasoned economist with over two decades of experience, I find myself intrigued by Citi’s dovish stance on the Fed rate cut plans. While many analysts have scaled back their expectations following the recent cooling inflation figures, it is refreshing to see an institution like Citi maintain its conviction in a more aggressive approach.

Discussions about a possible interest rate reduction by the Federal Reserve in September have been sparked by the latest US Consumer Price Index (CPI) inflation data. Although many experts have slightly scaled back their predictions for a 1.25 percentage point rate cut in 2024, CITI seems to maintain its belief in the more accommodating stance of the central bank. Despite recent evidence showing a decrease in inflation rates, which has alleviated worries about an immediate 0.5% interest rate reduction, analysts are still favoring a gentler economic landing.

Citi Predicts Dovish Fed Rate Cut Plans

Despite the recent indications of cooling inflation as shown by the latest US Consumer Price Index (CPI) data, where the year-over-year rate dropped to 2.5% from earlier estimates, Citi economists remain confident about their forecast of a 1.25% reduction in interest rates by the Federal Reserve. Moreover, the Core CPI inflation figure aligns with market predictions, settling at 3.2%.

Based on these numbers, Citibank is predicting that the Federal Reserve might adopt a more conservative 0.25 percentage point reduction at the upcoming FOMC meeting. Importantly, their report highlights that the essential measure of core PCE inflation, crucial for Fed policy choices, has shown stability.

Nevertheless, economists from Citibank, as indicated in a recent analysis, emphasize that the Federal Reserve will prioritize the labor market when making decisions about interest rates. Despite the latest data, Citibank maintains its prediction of a total reduction of 1.25 percentage points in rates for this year, with larger cuts of 0.5 percentage points anticipated in November and December.

This method mirrors Citibank’s view that the Federal Reserve should make gradual changes to its policies, given their need to manage persistent inflation issues and an economy with varied conditions.

Market Awaits PPI Inflation Data Ahead September FOMC

Market experts are keeping a close eye on the upcoming U.S. Producer Price Index (PPI) inflation figures, as they might offer extra information about inflation trends. Traders are keen to understand how this data could impact the Federal Reserve’s (Fed) decision regarding interest rate adjustments at the next Federal Open Market Committee (FOMC) gathering.

Significantly, the approach the Federal Reserve takes regarding interest rate changes plays a key role because it influences borrowing expenses and overall economic circumstances. Essentially, lower interest rates tend to enhance market confidence, possibly strengthening market confidence.

In August, there’s predicted to be an increase in US Producer Price Index (PPI) inflation to 0.2%. This follows a rise of 0.1% in the previous month. Contrastingly, the Core PPI, which was at 0.3% in July, is expected to decrease slightly to 0.2% this month.

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2024-09-12 00:47