Citi: Inflation slows, and the Fed's rate cuts may exceed current expectations

ChainCatcher news, the Federal Reserve has raised the target federal funds rate by 0.5 percentage points by the end of 2025. Citigroup economist Andrew Hollenhorst believes that the Federal Reserve may find itself in a bind. With the core PCE rising 0.1% month-on-month in November, the increase in prices is slowing down, and the final rate cut by the Federal Reserve may exceed current expectations.

"In our base case, a softening labor market will lead the Federal Reserve to cut rates at every meeting going forward." This view contrasts with the market's expectation that the Federal Reserve will pause rate cuts in January. "But even if we are wrong, a stagnant unemployment rate and slowing inflation would be enough to justify rate cuts at every meeting at least beyond January."