Global Market: Citi expects Fed to raise rates by 25 basis points in December after hot US inflation data
Citigroup now expects the US Federal Reserve to raise interest rates by 25 basis points in December following hotter-than-expected September inflation. The brokerage forecasts rates to remain unchanged thereafter, with rate cuts unlikely before Ju...
By Anupam Nagar, ETMarkets.com |
ETMarkets.com
Hotter US inflation prompts Citigroup to revise its rate outlook, with a December hike now expected.
Citigroup now expects the Federal Reserve to raise interest rates by 25 basis points in December after US consumer inflation in September came in significantly above expectations.
The revised forecast marks a shift for Citi, which had been the only major holdout expecting the Fed to leave rates unchanged for the remainder of the year, even as financial markets increasingly anticipated another rate increase in December.
Citi expects the US central bank to keep interest rates steady after the widely anticipated December hike. The brokerage also forecasts that the Fed will not begin cutting rates until June 2027.
Read more: Global Market: Japan’s Nikkei plunges nearly 5% as AI stocks tumble on CoreWeave debt concerns
September's inflation data showed consumer prices accelerating, driven by a surge in gasoline costs. Price pressures also broadened beyond energy, raising concerns that underlying inflation could remain persistent and complicate the Fed's efforts to bring inflation under control.
Expectations for an earlier rate increase also strengthened following the inflation report. Interest rate futures tied to the Fed's policy rate indicated a 47.1% probability of a hike at the central bank's October 27-28 meeting, up from about 22% before the data was released, according to CME Group's FedWatch tool, Reuters reported.
Read more: Global Market: China stocks fall as hot US inflation data revives rate hike fears
Markets were pricing in roughly a 94% probability of a December rate increase, reflecting growing expectations that persistent inflation could prompt the Fed to keep monetary policy tighter for longer, Reuters reported.
The latest data adds to uncertainty over the Fed's policy outlook, as policymakers weigh persistent price pressures against the broader economic impact of higher borrowing costs.
(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times.)
The revised forecast marks a shift for Citi, which had been the only major holdout expecting the Fed to leave rates unchanged for the remainder of the year, even as financial markets increasingly anticipated another rate increase in December.
Citi expects the US central bank to keep interest rates steady after the widely anticipated December hike. The brokerage also forecasts that the Fed will not begin cutting rates until June 2027.
Read more: Global Market: Japan’s Nikkei plunges nearly 5% as AI stocks tumble on CoreWeave debt concerns
September's inflation data showed consumer prices accelerating, driven by a surge in gasoline costs. Price pressures also broadened beyond energy, raising concerns that underlying inflation could remain persistent and complicate the Fed's efforts to bring inflation under control.
Expectations for an earlier rate increase also strengthened following the inflation report. Interest rate futures tied to the Fed's policy rate indicated a 47.1% probability of a hike at the central bank's October 27-28 meeting, up from about 22% before the data was released, according to CME Group's FedWatch tool, Reuters reported.
ADVERTISEMENT
Read more: Global Market: China stocks fall as hot US inflation data revives rate hike fears
Markets were pricing in roughly a 94% probability of a December rate increase, reflecting growing expectations that persistent inflation could prompt the Fed to keep monetary policy tighter for longer, Reuters reported.
The latest data adds to uncertainty over the Fed's policy outlook, as policymakers weigh persistent price pressures against the broader economic impact of higher borrowing costs.
(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times.)
Too busy to trade in stocks? Invest in Mutual Funds with ET Money!
Bookmark or read stories offline -
Download ET Markets APP
Download ET Markets APP
Related Articles
Global Market: China stocks fall as hot US inflation data revives rate hike fearsADVERTISEMENT
