Citibank delays Federal Reserve's January rate cut expectation, underlying a reassessment of employment data

Citigroup has recently adjusted its expectations for the Federal Reserve’s rate cuts in 2026, changing the original schedule of “January, March, September” to “March, July, September,” each cut by 25 basis points. This seemingly minor timing adjustment reflects differing judgments about US economic data and the employment market.

Why no cut in January anymore

The key lies in the divergent expectations for upcoming non-farm payrolls and unemployment rate data. According to the latest reports, market expectations for December US non-farm employment growth are centered around 70,000 to 75,000 new jobs, with the unemployment rate expected to be between 4.5% and 4.7%. Institutions like Citigroup predict the unemployment rate could rise to 4.7%, and this figure is very important.

Federal Reserve Chair Jerome Powell has previously hinted that official employment data may be systematically overstated, and actual employment growth might have already stagnated or even declined. This suggests that surface-level employment figures could mask the true weakness in the labor market. Citigroup previously stated that if the December unemployment rate rises to 4.7%, there could be a 25 basis point rate cut this month, but the current adjustment indicates their confidence in a January rate cut is waning.

What does delaying the rate cut mean

Moving the cut from January to March signals that the Fed is waiting for more data confirmation. This does not mean the Fed will not cut rates, but rather that the pace will be more cautious. Citigroup still expects three rate cuts throughout the year (each 25 basis points), totaling a 75 basis point reduction, which is still below the “over 100 basis points” that Fed Governor Michelle Bowman mentioned for 2026.

This delay reflects uncertainty about rate cuts— the Fed needs to see clearer signs of inflation easing and employment market weakness before starting a rate cut cycle. In other words, the “no cut” in January is a wait-and-see attitude.

How the market might react

Based on analysis of related information, this expectation adjustment will have different impacts on various assets:

Impact on gold: The delay in rate cuts may temporarily suppress gold prices (due to a stronger dollar), but overall it remains bullish for the year. Central banks continue to increase gold holdings; China’s central bank has added gold for 14 consecutive months, and geopolitical risks are boosting safe-haven demand. As long as the overall direction of rate cuts remains unchanged, the medium-term upward trend of gold is unlikely to reverse.

Impact on the crypto market: This is what the market is most focused on. According to related reports, institutions’ forecasts for Bitcoin in 2026 range from $120,000 to $190,000, but on the condition that “liquidity is unleashed and rate cuts begin.” The postponement of January rate cuts may cause doubts about the timing of liquidity release, but it does not change the overall easing trend for the year.

Summary

Citigroup’s adjustment is not bearish but more cautious. No rate cut in January, followed by cuts in March, July, and September, reflects dynamic tracking of economic data— the Fed needs to see genuine employment weakness before acting. Non-farm payroll data will be key in determining the pace of rate cuts; a rise in the unemployment rate to 4.7% will reinforce expectations of rate cuts, but even so, the Fed is choosing not to rush into action in January. For investors, the core question is whether a rate cut cycle will truly begin, rather than focusing on the specific months. The total 75 basis points of cuts planned for the year are sufficient to support a rally in risk assets, but the timing and pace need to be adjusted according to new expectations.