Citi postpones Fed rate cut forecast. Wells Fargo does not expect easing in 2026

Citigroup has moved its forecast for the start of interest rate cuts by the U.S. Federal Reserve closer to the end of the year, pointing to persistent inflationary pressures and strong employment data. At the same time, Wells Fargo revised its forecast and now does not expect policy easing at all in 2026, Reuters reports.

Citigroup now predicts rate cuts totaling 75 basis points in September, October and December instead of the previously forecasted June, July and September. The bank attributed the change in expectations to persistent inflation risks and stronger-than-expected U.S. employment data, Reuters writes. Employment growth in March rebounded after the end of the strike of health care workers, as well as amid warmer weather that supported activity in a number of sectors.

"We continue to believe that signs of a weakening labor market will lead to rate cuts later this year. However, the timing of near-term data releases points to a later start to the down cycle than we had previously anticipated," Citigroup said.

In addition, Wells Fargo said on Monday, April 6, that it no longer expects the U.S. Federal Reserve to cut interest rates in 2026. The bank cited uncertainty around inflation and increased geopolitical risks associated with the war in the Middle East. Earlier, Wells Fargo predicted two rate cuts by the U.S. central bank this year.

"Amid a notable but likely temporary spike in inflation and heightened uncertainty, we believe the balance of risks has shifted in favor of a more wait-and-see stance on the Fed's part," Wells Fargo strategists said.

Earlier on Monday, April 6, JPMorgan Chase CEO Jamie Dimon warned that war in the Middle East could lead to a larger increase in U.S. interest rates than the market expects.

Dimon's statements came a day after U.S. President Donald Trump stepped up pressure on Iran, threatening strikes on energy infrastructure and bridges if Tehran did not open the Strait of Hormuz, a key route for the world's oil supplies, by the evening of April 7.

Also, concerns over rising inflation amid war in the Middle East have led markets to largely rule out a U.S. interest rate cut this year after monetary easing in the States 2025 helped push the stock market to fresh records, Reuters notes.

At the trading on April 6, May futures for Mark WTI oil were traded at $111.9 per barrel. June contracts for the benchmark Mark Brent cost $109.6. Since the beginning of the war in the Middle East, oil prices have added about 60%.

This article was AI-translated and verified by a human editor