US

Could the Fed Hike Rates in December?

_{Posted on Nov 1, 2018}

Last month, the S&P 500 fell below 2700 and 10-year US Treasury (UST) yields dipped below 3.10% – even as US Q3 real GDP printed a robust 3.5% quarter-over-quarter. The general risk-off in US equity markets led 10-year UST yields to decline 11 basis points (bps) to 3.08% as the US dollar strengthened 1.0% relative to the EUR.

Since September, Citi analysts have predicted that the Federal Reserve (Fed) may raise the policy range by 25bps in December – but only increase interest on excess reserves (IOER) by 20bps. The reason for this “technical adjustment” is to keep Fed funds effective comfortably within the 25bp policy range.

Despite the equity market correction in October, Citi analysts continue to view the decline in equity prices as not significant enough to meaningfully change the outlook for the economy or for monetary policy.

Strong consumption supports GDP in Q3 and beyond: the risk-off sentiment was despite an economy that is growing well above potential – but not yet stoking inflationary pressure. Q3 real GDP advanced 3.5% quarter-over-quarter – just slightly stronger than the 3.2% that Citi analysts expected. Consumption was behind the upside surprise, advancing 4.0% – the strongest increase since 2014.

Citi expects strong real GDP growth to continue through 2018 and into 2019 as well as for the Fed to remain on course for a December hike. Citi analysts forecast a 20bp – rather than 25bp – rise in IOER.

To take advantage of higher Fed rates – Citi analysts are overweight short-duration US Treasuries and corporate debt.

_{By Citi Global Wealth Investments | Mar 18, 2024}

Weekly FX Focus - DXY: Attention On The BoJ, Fed And SNB This Week

Markets see a busy week with 10 central bank meetings this week. Our Head of FX Strategy brings our focus to 3 central bank meetings that markets highly anticipate.

_{By Citi Wealth Insights | Mar 18, 2024}

US data over the past week still points to Fed on track to cut rates by mid-year

USD: The University of Michigan Consumer Sentiment index delivers a preliminary reading of 76.5 in March, lower than consensus estimates for 77.4 and a downtick from February’s 76.9. Sentiment in March is nearly 25% above November 2023 lows and roughly halfway between the historic low during peak inflation in June 2022 and pre-pandemic levels.

FX US

_{By Citi Wealth Insights | Mar 11, 2024}

Still healthy February nonfarm payrolls is unlikely to shift Fed narrative towards further easing

USD: According to the Bureau of Labor Statistics, the month of February sees 275k new jobs created that is well above consensus expectations for 200k. However, that upside surprise is more than offset by a 167k downward revision to the prior two months with the January blockbuster employment report alone revised down from 353k to 229K.

FX US

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This communication is for general information only and should not be relied upon as financial advice. The information herein has no regard to the specific objectives, financial situation and particular needs of any specific person and is not intended to be an exhaustive discussion of the strategies or concepts mentioned herein or tax or legal advice. Any person interested in the strategies or concepts mentioned herein should consult their independent tax, legal, financial or other advisors,
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