Citigroup Economists Predict Federal Reserve Rate Cuts Amid Global Economic Weakness

According to Odaily, a team of economists led by Andrew Hollenhorst at Citigroup has projected that a relaxed labor market will alleviate inflationary pressures in the service sector, while global economic weakness is expected to suppress commodity prices. This economic environment is anticipated to prompt the Federal Reserve to adopt an aggressive approach, with expectations of a 25 basis point rate cut at each meeting until July next year. This would bring the federal funds rate down to a range between 3% and 3.25%. This forecast is significantly lower than market expectations, which predict the federal funds rate to be around 4% by that time. The economists' analysis suggests that the combination of a softening labor market and subdued global conditions will create a conducive environment for the Federal Reserve to implement these rate cuts. The anticipated reduction in interest rates is seen as a response to the need for stimulating economic activity amid ongoing global uncertainties and inflationary challenges in the service sector.