Citigroup pushes first Fed rate cut forecast to late 2026

Citigroup has pushed its first Fed rate-cut call into late 2026, now looking for quarter-point cuts in October and December and another in January 2027. For households and companies, that means the relief many borrowers expected is arriving later, not sooner, and the cost of waiting shows up in mortgages, credit cards and business loans.

The shift followed the Federal Reserve’s decision to keep its benchmark rate at 3.5% to 3.75% on a unanimous 12-0 vote. In its June 17 statement, the central bank said economic activity was expanding at a solid pace, but inflation remained elevated relative to its 2% goal, citing supply shocks and energy-price increases as pressure points and pointing to elevated uncertainty tied in part to the conflict in the Middle East.

Warsh sharpened the message in his first press conference, dropping forward guidance and saying, “I can’t give you any forward guidance about what we’re going to do next.” That matters because Fed communication helps set expectations for everything from mortgage rates to corporate financing; with less guidance, investors have to lean harder on each inflation report, labor-market reading and speech from policymakers to guess whether the next move is a cut, a hold or a hike.

The market reaction has already been forceful. Reuters reported that nearly half of policymakers now expect rates to rise this year, while CME FedWatch showed a 50% chance of a September hike, up from 27% a day earlier. The 2-year Treasury rose to its highest level in more than a year as stocks sold off late in the session, and the Fed’s own projections showed year-end PCE inflation at 3.6%, up from 2.7% in March. Citi, once among the more dovish major brokerage forecasts, is now closer to the market’s skeptical end of the spectrum.

For borrowers, the practical translation is simple: mortgage rates are unlikely to fall quickly, credit-card APRs should stay stubbornly high, and businesses with heavy debt loads will have to plan capital spending without much help from the Fed. Savers may keep enjoying elevated yields for longer, but the broader message is less comforting: the next few months will be driven less by a preset rate path than by whether the data cools enough to force the Fed back toward easing.