TLDR
- Citigroup pushed back its Fed rate cut forecast from June to September 2026
- The U.S. added 178,000 jobs in March, far above the 60,000 estimate
- Citi still expects 75 basis points total in cuts across September, October, and December
- JPMorgan CEO Jamie Dimon warned the Iran war could push interest rates higher than markets expect
- The Fed’s April 7-8 meeting is expected to keep rates unchanged at 3.50%–3.75%
Citigroup has revised its Federal Reserve rate cut forecast, pushing the expected start date from June to September 2026. The bank still expects three cuts totaling 75 basis points, now spread across September, October, and December.
The reason for the delay is straightforward. The U.S. economy added 178,000 jobs in March, well above the consensus estimate of just 60,000. The unemployment rate also fell to 4.3%, down from 4.4% in February.
The strong jobs report was partly driven by the end of a healthcare workers’ strike and warmer weather. February’s job numbers were also revised upward to 117,000 from an initial reading of 92,000.
In an April 3 note, Citigroup wrote that “the timing of upcoming data suggests a later start to rate cuts than we had previously been expecting.” The bank still believes labor market weakness will develop, but later in the year.
Citigroup expects softer hiring conditions to push unemployment higher over the summer. That softening, the bank says, will create the conditions needed for the Fed to begin cutting rates.
Iran War Adds Pressure on Rates
JPMorgan CEO Jamie Dimon raised a separate concern in his annual shareholder letter, published April 6. He warned that the ongoing U.S.-Iran war could push inflation and interest rates higher than markets currently expect.
Dimon pointed to potential oil and commodity price shocks, along with disruptions to global supply chains, as key risks. He said these factors could lead to “stickier inflation and ultimately higher interest rates.”
Despite these risks, Dimon said the U.S. economy remains resilient. Consumers are still spending and businesses remain healthy, he wrote.
Dimon also flagged concerns about Europe’s economic direction, calling it “currently on a bad path.” He called for a free trade agreement with Europe tied to economic and military reforms.
What the Fed Is Expected to Do Next
All eyes are now on the Federal Reserve’s April 7-8 meeting. Rates are widely expected to stay unchanged at 3.50%–3.75%.
Fed Chair Jerome Powell is expected to take a cautious tone, emphasizing that future decisions will depend on incoming data. That stance aligns with Citigroup’s view that cuts won’t come until later in the year.
Dimon also flagged private credit as a potential risk ahead. He said losses on leveraged lending will likely be higher than expected due to weakened credit standards.
He added that JPMorgan’s AI adoption is likely to move faster than previous technological shifts. The bank said it will not ignore the pace of that change.
