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10/06/24
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First US Rate Cut Likely in Sept – Citi
Economists at Citi now feel it’s likely the Federal Reserve will start to cut rates in Sept. rather than July, after last week’s much stronger-than-expected May jobs data release.
The bank’s economists said in a note on Friday they now expected 0.75% of total cuts this year in Sept., Nov. and Dec.
They added the jobs report did not change their view that hiring demand, and the broader economy, was easing and that this would ultimately lead to the Fed reacting with a number of cuts starting in the next few months.
That means Fed Chair Jerome Powell and the committee will likely not make any decisions in June and July as they wait for more data on slower inflation and activity.
The establishment payrolls survey exceeded expectations and added 272K jobs in May, compared to the consensus of 175K and Citi’s forecast of 140K. Government hiring, which had last month slowed to only 7K, increased by 43K last month. Healthcare hiring also surged, adding 89K jobs.
The more volatile household survey’s performance was much weaker, with employment 483K lower for the month. Despite a 0.2% decline in the participation rate, the unemployment rate increased by 0.1% to 3.96% from 3.86%, rounding to an above-estimate 4.0%.
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