Citi’s Chronert Predicts Federal Reserve Pause Followed by Rate Cut

Scott Chronert, head of U.S. equity strategy at Citi Research, suggests that the Federal Reserve’s next move could actually be a rate cut, despite market expectations pointing toward another increase. Chronert anticipates the central bank may enter a holding pattern until mid-2027 before lowering borrowing costs. However, according to CME’s FedWatch tool, fed funds futures currently indicate an roughly 85% probability of another rate hike at the December meeting. Citi economists believe the Fed is likely in a pause mode following the September hike until the middle of next year, Chronert noted on CNBC’s “Squawk on the Street.” The Federal Reserve raised interest rates by 25 basis points in September, marking its first increase in borrowing costs in three years, though the central bank signaled that further hikes remain possible. Chronert commented that inflation could begin to ease while the labor market faces mounting pressure. He acknowledged that the September rate hike alone would not significantly alter the narrative that the Fed is serious about reducing inflation. Consequently, he suggested that one or two additional hikes might be necessary to reassure traders of the central bank’s stability. “I can take another Fed rate hike and probably spin that as a positive,” Chronert added.

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