Fed To Cut Rates At June Meeting

Fed To Cut Rates At June Meeting by Adam Rosen last updated on June 02, 2024

There are still no change of plans regarding the June rate cut from the Federal Reserve. If we look around, there's a lot of talk about how the Fed will hold off its decision to cut rates.

But, it seems that the Citi Group has a different view when it comes to the Fed's rate cut plan. Citi Group shared its research note, which discussed the labor market condition.

Nfp Report Favors Fed Rate Cut

According to them, the NFP data showed a strong hiring trend, but all the other metrics, including household survey, hint at possible weakness.

Citi added that the unemployment rate reached 3.38% against a reading of 3.86%, while the employment numbers based on household surveys remain at 4-month lows. They also commented on how the March job numbers were way higher than the 150K forecasts made by Citi.

Citi believes that the stronger NFP report will actually be good news for the Federal Reserve. That's why they still believe that the first rate cut is coming in June as long as the labor and economic activity stays the same.

In 2024, around 75 bps or 0.75% rate cut will take place, according to Citi Group. Another base case shared by Citi is a 125 bps rate cut (1.25%) if the labor market condition deteriorates.

The market's initial reaction to the NFP sent the USD higher while depressing the stock markets. However, closer inspection revealed that the average earnings are still the same with no impressive jump. This particular data regarding wages has led many to believe that the June rate-cut plan remains intact.

Now that even Citi has joined the camp of June rate cuts, it makes sense to think that rate cuts by the Federal Reserve are now closer than ever!