BofA Securities’ Mark Cabana weighs in as Fed holds rates and Citi pushes back cut forecast to October

The Federal Reserve decided on June 17 to keep the federal funds rate parked at 3.5%-3.75%. Mark Cabana, co-head of global rates research at BofA Securities, joined Bloomberg’s “Real Yield” to unpack what the Fed’s latest stance means for fixed income and the broader economy.

The headline takeaway: Citigroup has revised its forecast for the first rate cut to October 2026, a month later than its previous call of September. The shift came directly in response to the Fed’s updated projections released alongside its decision to hold rates steady.

Stronger jobs, stickier rates

May 2026 nonfarm payrolls came in at 172,000, beating expectations and keeping the unemployment rate anchored at 4.3%. The federal funds rate has been holding steady in the 3.5%-3.75% range since December 2025, after the central bank delivered three rate cuts in the final months of last year.

Cabana and Jamie Patton, co-head of global rates at TCW, discussed the implications during the Bloomberg segment with host Scarlet Fu. The conversation centered on why the Fed’s revised forecasts suggest policymakers are in no rush to resume cutting, particularly with the labor market showing this level of resilience.

The year-end 2026 headline inflation forecast sits at 3.6%, which is notably above the Fed’s 2% target. That gap between where inflation is projected to land and where the Fed wants it creates a very real constraint on how quickly policymakers can ease monetary policy without losing credibility.

What this means for markets and liquidity

For fixed-income markets, the delay in monetary easing introduces fresh volatility in yields. Real estate is another sector feeling the squeeze, as a delay in Fed easing means homebuyers and commercial developers continue to face a more expensive financing environment.

Crypto’s rate sensitivity is real

The current environment, with the funds rate locked at 3.5%-3.75% and no cut expected until October at the earliest, represents an extended period of tighter financial conditions. The three cuts delivered in late 2025 did coincide with a meaningful uptick in crypto market activity.

Citigroup’s revised timeline anticipates three rate cuts by early 2027, with expected cuts in October, December 2026, and January 2027. The 172,000 jobs number from May is worth watching as a template. If June and July payrolls come in at similar or stronger levels, the October cut forecast could face the same fate as the September one.

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