Citi economists gave the date they think the Federal Reserve will begin cutting rates, following much better-than-expected May jobs data released last week.
The economists of Citi They said they believe the Federal Reserve will begin cutting rates in September. “We now expect a total of 75 basis points of cuts this year in September, November and December”the bank’s experts explained in a note on Friday.
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“But the jobs report does not change our opinion that hiring demand, and the economy in general, is slowing and that this will ultimately cause the Fed to react with a series of cuts in the coming months,” they added.
According to this analysis, it is most likely that Fed Chair Jerome Powell and committee delay any decision in June and Julywaiting for more data on the slowdown in activity and inflation.
Establishment Survey Payrolls Beat Expectations, With 272,000 Jobs Created in May, compared to the consensus of 175,000 and Citi’s forecast of 140,000. Public hiring, which had slowed to just 7,000 jobs last month, increased by 43,000 last month. Hiring in the healthcare sector also increased, creating 89,000 jobs.
On the contrary, the more volatile household survey showed much weaker results, with a decrease of 483,000 jobs for the month as a whole. Despite a 0.2 percentage point drop in the participation rate, the unemployment rate increased 0.1 percentage point, from 3.86% to 3.96%, rounding up to 4%, above consensus.
“Fed members were very reactive to the monthly data, which means today’s jobs report is enough to keep them on hold for a bit longer.”, detailed the Citi economists. However, the constant rise in the unemployment rate and the general deterioration of the labor market will continue to be a cause of concern for the central bank, they added.
“By September we hope that Fed members have pivoted to their full employment role and undertaken a series of 25 basis point rate cuts in each meeting until reaching a terminal rate of 3.25-3.5%,” they concluded.
