Major Banks Delay Fed Rate Cut Forecasts

Major Wall Street banks have significantly delayed their forecasts for Federal Reserve interest rate cuts, pointing to robust U.S. job growth, persistent inflation and escalating pressures from the ongoing U.S.-Iran war as key factors keeping monetary policy tight.

Citigroup, in a note dated April 3, revised its outlook to expect no rate reductions before September, followed by 75 basis points of cuts across September, October and December. This marks a shift from its prior projection of easing starting in June. The bank attributed the change to March's employment report, which showed the economy adding 178,000 jobs, far exceeding the consensus estimate of 60,000. Unemployment dipped to 4.3 percent from 4.4 percent the prior month, bolstered by the end of a healthcare workers' strike and warmer weather that boosted hiring. "We continue to think signs of a weakening labor market will result in cuts later in the year," Citigroup economists wrote. "But the timing of upcoming data suggests a later start to rate cuts than we had previously been expecting."

JPMorgan Chase offered an even more cautious view. Chief U.S. economist Michael Feroli projected zero rate cuts through 2026,...