FED Raises Interest Rates, Citi and Goldman Sachs Update Their Forecasts! Is a Rate Cut Possible?

While tensions surrounding the Clarity Act continue in Bitcoin and altcoins, the Fed yesterday raised its policy interest rate by 25 basis points to the 3.75-4.00% range, as expected.

This decision marks the Federal Reserve’s first interest rate hike since July 2023, driven by inflation remaining above the Fed’s 2% target and strong economic activity. Fed officials have indicated another rate hike is possible later in the year, prompting some US banks to revise their forecasts.

Citi’s New Interest Rate Forecast!

Citigroup expects the Fed to keep interest rates unchanged at its October and December meetings, following its September rate hike.

The bank also believes that yesterday’s interest rate hike decision does not indicate a prolonged period of tightening, and that it can be characterized as an adjustment rather than the beginning of a new interest rate hike cycle.

If inflation falls in the October and December data, Citi predicts that the Fed will resume interest rate cuts in June 2027.

According to Citi’s updated forecast, the first 25 basis point interest rate cut could occur in June 2027. The bank also expects two more 25 basis point cuts in September and December 2027. However, a key condition for this scenario is that inflation in the US continues its downward trend in the coming period.

At this point, Citi’s forecast is based on the expectation that the Fed will maintain its tight monetary policy in the short term, but may resume interest rate cuts from mid-2027 onwards if inflationary pressures ease.

Goldman Sachs Expects Further Interest Rate Hikes!

Following yesterday’s rate hike, Goldman Sachs expects the Fed to raise its policy rate by another 25 basis points in October.

According to Reuters, the bank updated its expectations following a 25 basis point interest rate hike. This would mean a potential increase in October would be the second consecutive rate hike.

Goldman Sachs had previously predicted that the Fed would not change interest rates after its September rate hike. However, Goldman Sachs analysts stated that this assessment was influenced by hawkish messages from Fed officials regarding further tightening to bring inflation back to the 2 percent target.

Analysts also added that they see October as the most likely time for the next interest rate hike.

*This is not investment advice.