Citi sees 'sharp dovish pivot' from Fed in coming months
Investing.com -- Citi strategists anticipate a “sharp dovish pivot” from Federal Reserve Chair Jerome Powell and the FOMC in the coming months, following hawkish updates to the Fed's latest Summary of Economic Projections .
The Fed’s base case assumes the unemployment rate will remain stable, allowing for a gradual reduction in rates as inflation eases from 3% toward the 2% target. However, Citi believes a “continued softening of the labor market is likely to become even more evident in coming months, keeping the Fed cutting at a faster pace than markets are pricing,” with just 50 basis points of cuts currently expected through mid-2026.
Still, he refrained from signaling that policy would need to become less restrictive to prevent excessive labor market loosening. The unemployment rate, currently at 4.246% unrounded, continues to reflect a softening labor market. December’s unemployment rate can easily reach 4.4% and likely rise above 4.5% in the coming months, exceeding the Fed’s 2025 year-end SEP projection of 4.3%.
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