The Federal Reserve raised its federal funds target for the end of 2025 by 0.5 percentage points, thus changing its rate cut plans for 2025, while economists at Citibank believe that the Federal Reserve may find this to be a wrong path.
Citibank economist Andrew Hollenhorst stated that due to a 0.1% month-on-month increase in core personal consumption inflation in the USA in November, the data shows that inflation is slowing down, and the Federal Reserve may ultimately cut rates more than currently expected.
Hollenhorst said, "In our baseline scenario, a weak labor market leads the Federal Reserve to gradually cut rates at each of its upcoming meetings." This view differs from market expectations regarding the Federal Reserve pausing rate cuts in January.
Economists stated, "But even if we preset a wrong scenario where the unemployment rate is stagnant, slowing inflation would be sufficient reason to cut rates at least every other policy meeting."