Citigroup’s verdict: the reasons for rate hikes have already disappeared

The three pillars that have long supported a hawkish stance—rising oil prices, accelerating wages, and core PCE above the target—have successively gone out
In June, nonfarm payrolls added only 57,000; the previous two months were revised down by a combined 74,000. The small dip in the unemployment figure is also due to a decline in the labor force participation rate, not because employment is improving
On July 2, Citigroup gave the conclusion upfront: the first 25bp cut on October 28, another 25bp cut in December, with rates ending the year at 3.0%-3.25%
The market is already pricing this in: the probability of holding steady in July is about 77%, and the expectation of a rate cut in October is already built in
Now bitcoin:native is at $63K, with a positioning bias that’s bullish. Spot gold is above $4.2k in early trading, hitting a two-week high. The two assets moving at the same time shows the market is placing orders based on expectations that rates will fall
July 9 is the key turning point
The Fed will publish the June meeting minutes on July 9. What Powell said then, and how he weighs the trade-off between inflation and employment—these details will determine whether an October rate cut is highly likely or something you can confidently bet on
At that time, the market’s reaction may be even more worth watching than the minutes themselves
From a nonfarm payrolls surprise miss and M2 setting an all-time high, to Citigroup now stating its position clearly, the direction of this macro narrative is becoming increasingly clear
The only variable is if CPI or PCE rebounds next, the whole set of expectations could flip instantly. The new M2 data in late July is also a point of verification
DYOR Not investment advice