Citi expects Fed to cut rates by 25 basis points in June, September, and December 2027

Citigroup is sticking with a distinctly dovish call on the Federal Reserve’s next moves, forecasting three separate 25 basis point rate cuts in June, September, and December of 2027. In a market where some banks are still debating whether the next move is a cut or a hike, Citi’s positioning stands out like a dove at a hawk convention.

The forecast places Citi squarely at odds with much of Wall Street, where persistent inflation and a cautious Fed under new Chair Kevin Warsh have pushed consensus timelines for easing further into the future. Bloomberg’s June 2026 economist survey landed on a median expectation for the first cut in June 2027, with a second by December, which at least gives Citi some company on timing if not on the total number of reductions.

Where Citi stands versus the rest of Wall Street

Citi’s rate path projections have been evolving. The bank had previously penciled in 25 basis point cuts for October and December 2026, followed by another in January 2027. Those earlier forecasts were pushed back after stronger-than-expected economic data and Warsh’s pivot away from forward guidance toward a more strictly data-dependent approach at the Fed.

Citi’s reasoning rests on two pillars: softening labor markets and expected moderation in inflation over the coming quarters.

Rival institutions aren’t buying it. Bank of America has flagged the risk of a prolonged hold period, keeping rates elevated well into 2027 or beyond. Nomura has gone further, raising the specter of outright rate hikes. Traders have at times priced in a greater than 50% probability of a rate increase as soon as September 2026, a stark contrast to Citi’s vision of a central bank preparing to loosen.

The inflation problem that won’t quit

Much of the hawkish consensus traces back to inflationary pressures that have proven stubbornly persistent through 2026. Oil price spikes tied to geopolitical tensions, particularly those involving Iran, added fuel to an already warm inflation picture. Strong employment figures have compounded the problem, giving the Fed little cover to begin cutting even if growth shows signs of moderating.

Warsh’s leadership style has amplified the uncertainty. Since taking over as Fed Chair, he has deliberately moved away from the kind of explicit forward guidance markets grew accustomed to under his predecessors, making forecasting its moves considerably harder for everyone involved.

The Bloomberg survey’s median landing on mid-2027 for the first cut reflects this cautious recalibration. Economists have been steadily pushing their expected easing timelines further out, a trend that has been in motion for months as inflation readings consistently surprised to the upside.

What three cuts in 2027 would mean for markets

If Citi’s forecast proves correct, three quarter-point cuts over the second half of 2027 would bring the fed funds rate down by 75 basis points total. Consumer-facing industries that depend on affordable financing, think housing, autos, and credit cards, would stand to benefit directly from lower borrowing costs.

Investors who loaded up on duration risk in anticipation of a dovish Fed in 2025 and early 2026 learned a costly lesson. The extended hold period has already punished premature rate-cut bets, and Citi’s timeline still assumes the Fed will find enough evidence of cooling to act.

The spread between Citi’s three-cut scenario and Nomura’s hike warnings represents an enormous gap in expected policy. Fixed income traders face perhaps the most acute challenge, as assessing duration risk when the market’s best minds disagree this fundamentally about direction requires either strong conviction or careful hedging.