According to BlockBeats, on July 5th, Citigroup Research stated in its weekly US economic report released on July 2nd that the significantly weaker-than-expected US non-farm payroll data in June strongly refuted the necessity of raising interest rates. Citigroup believes that many factors that previously supported a hawkish stance, including rising oil prices, accelerating wage growth, and core PCE exceeding the target, have faded, and "the rationale for raising interest rates has disappeared."
Data shows that US non-farm payrolls increased by only 57,000 in June, far below expectations, and the data for the previous two months were revised down by a combined 74,000. After the revision, the average monthly increase in non-farm payrolls over the past three months fell to approximately 111,000, a significant drop from the pre-revision level of over 180,000. The unemployment rate fell from 4.296% to 4.189% in June, but Citi believes this was mainly due to the labor force participation rate falling from 61.8% to 61.5%. If the participation rate had remained unchanged, the actual unemployment rate would have risen to over 4.5%.
Regarding inflation, Citigroup stated that multiple factors are collectively suppressing price pressures. Oil prices have fallen back to pre-conflict levels, and July CPI and PCE data are expected to show a month-on-month decline; further slowdown in housing rents will also drag down core CPI and core PCE. Furthermore, the revised core PCE methodology will adopt a more reasonable price adjustment method for AI-related goods. Citigroup estimates that the revised core PCE year-on-year growth rate may be lowered by 20 to 30 basis points, and will be officially reflected in September.
Citigroup maintains its baseline forecast that the Federal Reserve will hold rates steady at the July and September FOMC meetings, cut rates by 25 basis points for the first time at the October 28 meeting, and then cut rates by another 25 basis points in December, bringing the federal funds rate range down to 3.0% to 3.25% by the end of the year. Citigroup also expects the Fed to cut rates three more times in 2027, with a final rate range of 2.75% to 3.0%.