Citigroup delays Fed rate cut forecast to June 2027 after jobs surprise

Citigroup has pushed back its Fed rate cut forecast to June 2027, a shift that lands right as Bitcoin and the broader crypto market are still digesting what higher-for-longer US interest rates mean for risk assets. The change follows a jobs report that came in far stronger than anyone expected, and it reshapes the timeline investors had been using to plan around when borrowing costs might finally ease.

Key takeaways

• Citigroup now expects the Federal Reserve’s first interest rate cut in June 2027, replacing an earlier call for cuts in October and December 2026 and January 2027.
• US employers added 162,000 jobs in August, more than triple the 53,000 economists had forecast.
• The Fed raised its benchmark rate by 25 basis points on September 16, 2026, its first hike since July 2023, and 16 of 18 officials expect at least one more increase before year-end.
• Bitcoin dropped below $80,000 after the jobs data but later climbed above $86,000, helped by $433 million in ETF inflows on September 18 and short covering.

Citigroup Delays Fed Rate Cut Forecast to Mid-2027

Citigroup now expects the Federal Reserve to wait until June 2027 before cutting interest rates for the first time, according to Reuters, a delay of roughly nine months compared with the bank’s earlier outlook. The revision came directly after August payroll numbers blew past expectations and forced Wall Street to rethink how much room the Fed has to ease policy.

Revised Timeline for Rate Cuts

Citi had previously projected three rate reductions clustered between October 2026 and January 2027. That call is now gone. In its place, the bank’s economists see cuts arriving in June, September and December 2027, with the first cut now expected roughly nine months after the September hike.

Reasons Behind Forecast Change

The trigger was straightforward: US employers added 162,000 jobs in August, compared with economists’ expectations of just 53,000. Citi economists Andrew Hollenhorst and Veronica Clark said the numbers pointed to a labor market officials would view as broadly stable, shifting the Fed’s attention more squarely toward inflation. “The unemployment rate was unchanged and labor force participation rebounded noticeably,” they wrote. Prior months saw upward revisions as well: the July payroll figure swung to a 21,000 increase after initially showing a decline of 23,000, and the June number climbed by 11,000.

Strong US Labor Market Reinforces Higher Fed Rates

A resilient labor market gives the Federal Reserve less reason to cut rates for the sake of supporting jobs, and August’s data did exactly that. The report reinforced a picture of an economy still generating hiring momentum even after years of elevated borrowing costs.

August Employment Data and Labor Market Stability

The unemployment rate held steady at 4.1%, and labor force participation rose by 0.2 percentage points. August’s payroll gain was the strongest since March. Taken together, the revisions and the fresh data left little room to argue the labor market was cracking under the weight of higher rates.

Fed Officials’ Outlook on Rate Adjustments

Policymakers followed through on the tighter path the data implied. The Fed raised its benchmark rate by 25 basis points on September 16, 2026, pushing the federal funds target range to 3.75%-4% — the central bank’s first hike since July 2023. New projections released alongside the decision showed 16 of 18 Fed officials expect at least one more increase before the end of 2026.

Not every official sounds equally hawkish, though. Fed Governor Christopher Waller and New York Fed President John Williams have said they’d favor holding rates steady as long as inflation keeps moderating on a monthly basis. Waller and Fed Governor Michael Barr have also left the door open to further hikes if upcoming inflation data disappoints — a reminder that the path forward isn’t fully locked in, even with Citi’s new forecast in hand.

Impact of Fed Policy on Bitcoin and Crypto Markets

Higher interest rates create a real headwind for crypto because Bitcoin and similar assets don’t generate yield simply by being held, unlike Treasury securities, which become more attractive to investors when rates stay elevated. That dynamic has played out repeatedly in 2026 as shifting rate expectations rattled crypto prices.

Bitcoin Price Reaction to Jobs Report and Fed Hike

The August jobs data hit crypto markets almost immediately. Bitcoin fell below $80,000, reversing from an intraday high near $81,370 as traders repriced the odds of a Fed hike — rate futures jumped to a 61% probability of a September increase, up from 52% before the report, according to Reuters. Ahead of the Fed’s meeting, as the probability of a hike moved above 92%, the broader crypto market lost more than 2% and Bitcoin briefly slipped below $76,000. After the September 16 decision itself, Bitcoin dipped again toward $75,000.

Role of ETF Demand and Market Dynamics

None of that pressure proved lasting. Bitcoin recovered and eventually climbed above $86,000, briefly touching $87,000 this week — its highest level since late January. US spot Bitcoin ETFs recorded $433 million in net inflows on September 18, following a stretch of heavy withdrawals earlier in the week, and easing Treasury yields gave the rally further room to run.

HashKey Group senior researcher Tim Sun said the ETF inflows confirmed the rally rather than sparking it, with the move through $82,000 triggering short covering that carried Bitcoin higher still. That mix of forces — renewed ETF demand, falling yields, softer oil prices and forced short covering — makes it hard to pin Bitcoin’s rebound on any single cause, though it clearly shows crypto markets absorbing a rate hike without collapsing under it.

This matters beyond the immediate price swing. Citi’s updated Fed rate cut forecast effectively tells markets that the era of tighter monetary policy in the US could stretch well into 2027, meaning Bitcoin’s ability to rally on ETF flows and short covering — even as rate cuts get pushed further out — will likely keep getting tested against a backdrop of competing Treasury yields and a Fed still weighing whether one more hike is coming before year-end.

FAQ

Why did Citigroup delay the forecasted date for the Fed’s first interest rate cut?

Citigroup delayed the forecast due to stronger-than-expected US jobs data in August, which reduced concerns over the labor market strength.

How did Bitcoin respond to the Fed’s rate hike and US employment data?

Bitcoin fell below $80,000 after strong jobs data increased rate hike expectations but later recovered above $86,000, supported by ETF demand and short covering.

What is the current outlook of Federal Reserve officials on future interest rates?

16 of 18 Fed officials expect at least one more rate hike before the end of 2026, with some signaling rates may hold steady if inflation moderates.

How do higher interest rates affect cryptocurrencies like Bitcoin?

Higher interest rates pressure crypto assets because they do not generate interest, making them less attractive compared to yields on Treasury securities.

Article produced with the assistance of artificial intelligence and reviewed by the editorial team.