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2026-05-26 21:54:09
[Citigroup: Market Overreacts to Fed Rate Hike Expectations; Rate Cut Remains the Most Likely Next Step] ⑴ US Treasury yields fell due to hopes for a resumption of maritime traffic in the Strait of Hormuz, but investors currently reflect a higher probability of a Fed rate hike this year than a rate cut. Citigroup analysts believe this expectation is misrepresented. ⑵ Citigroup states that the risk balance is tilted to the other side, and the market may re-reflect expectations of a rate cut in the coming weeks or months. Lower energy costs will allow the Fed to refocus on a stable unemployment rate and above-target inflation, suggesting that interest rates should be maintained at current levels. ⑶ However, these analysts point out that the fundamental risk balance is tilted towards a weak labor market and slowing inflation, making a rate cut the most likely next step.
