Citibank has become Wall Street's most staunch "dovish" and still expects the Federal Reserve to cut interest rates three times this year.

Although the latest US employment data far exceeded market expectations and further strengthened the market's anticipation of the Fed maintaining high interest rates or even resuming rate hikes, Citigroup still insists that the Fed will cut rates three times this year. Citigroup's chief US economist Andrew Hollenhorst stated in a report on Friday that the robust May employment report will undoubtedly prompt Fed officials to pay more attention to the risk of rising inflation rather than the risk of weakening employment in the June meeting. However, he expects the US labor market to gradually cool off over the next three months, leading the market to reconsider rate cut expectations. Hollenhorst said, "Signs of weakness in the labor market will become more apparent in the coming months, and the market focus will ultimately shift from the risk of rate hikes to the possibility of rate cuts." Data released by the US Department of Labor showed that non-farm payroll employment increased by 172,000 in May, exceeding the predictions of all economists in the survey and driving the largest increase in employment over the past two years in the US over the past three months. The strong employment data further confirmed the resilience of the US economy, while weakening market expectations of an imminent rate cut by the Fed. However, Citigroup has not adjusted its monetary policy forecast accordingly. The bank still expects the Fed to cut rates three times in September, October, and December this year, each time by 25 basis points. In fact, Citigroup has maintained its prediction of "three rate cuts this year" since December last year, gradually postponing the first rate cut from January to September as the inflation situation changes. In comparison to Citigroup, mainstream Wall Street institutions have undergone a significant shift in attitude. At the beginning of the year, most large investment banks still predicted that the Fed would not begin cutting rates until 2027, with most institutions expecting around two rate cuts. However, with the US-Iran war leading to a surge in oil prices, energy prices pushing inflation higher, and the US job market remaining strong, Fed policy expectations have significantly changed. Currently, major US stock indices continue to hit record highs, the labor market remains robust, and inflation levels are consistently above the Fed's 2% target. Against this backdrop, most Wall Street institutions have gradually abandoned their predictions of rate cuts within the year. As of now, only Citigroup and Goldman Sachs still expect the Fed to cut rates this year among major US investment banks. Goldman Sachs maintained its prediction of one rate cut in December last month, while Citigroup has become the most steadfast representative of the "dovish" stance on Wall Street. Meanwhile, more and more institutions are beginning to discuss the possibility of rate hikes. Since the Fed's meeting in April, the market's assessment of the monetary policy outlook has clearly shifted towards a hawkish tone. The meeting minutes showed that at that time, three policymakers opposed the retention of "accommodative" language in the policy statement, suggesting that hints of future rate cuts should be removed. Recently, including Fed governors Powell and Quarles, as well as several regional Fed presidents, have publicly stated that further rate hikes are not ruled out if inflation remains persistently above target levels. Among Wall Street institutions, JPMorgan Chase has been predicting rate hikes by the Fed since January, while BNP Paribas has further shifted towards a hawkish stance after the latest employment data, expecting the Fed to start raising rates three times from December 2026. However, Citigroup continues to attract market attention due to its accuracy in forecasts over the past year. Last year, while most major investment banks believed the Fed would remain unchanged, Citigroup accurately predicted that the Fed would implement three 25 basis point rate cuts.