Citi Predicts Lower Terminal Rate by 2025

Citi Predicts Lower Terminal Rate by 2025

Financial giant Citi is making waves with its latest prediction for the terminal federal funds rate. Here's a breakdown of the news and its potential implications:

Citi's Bearish Forecast:

• Citi analysts anticipate the Federal Reserve (Fed) will cut interest rates by 200 basis points (2%) through its next eight meetings, ending in July 2025.
• This aggressive easing cycle would bring the terminal rate, the peak federal funds rate before the Fed starts raising rates again, down to a range of 3.25%-3.50%.
• This forecast is significantly lower than current market expectations and the Fed's own projections.

Reasons for Citi's Outlook:

• Economic Slowdown: Citi cites fresh signs of a slowing US economy and rising unemployment as key factors driving the need for rate cuts.
• Inflation Concerns: While inflation remains a concern, Citi believes it may have peaked and will moderate in the coming months.
• Fed's Response: The Fed's commitment to achieving maximum employment could lead them to prioritize growth concerns and cut rates to stimulate the economy.

Impact on Markets:

• A lower terminal rate could potentially lead to:
  • Lower borrowing costs: Businesses and consumers could benefit from lower interest rates on loans and mortgages.
  • Bond market rally: Bond prices typically rise when interest rates fall.
  • Stock market volatility: The market might initially react positively, but uncertainty about the economic slowdown could lead to volatility.

Should You Take Action?

While Citi's forecast is noteworthy, it's crucial to conduct your own research before making investment decisions.

Here are some approaches to consider:

• Monitor Economic Data: Stay informed about incoming economic data to gauge the validity of Citi's slowdown prediction.
• Focus on Company Fundamentals: Prioritize companies with strong fundamentals and the ability to weather economic fluctuations, regardless of the interest rate environment.
• Embrace Diversification: Ensure a well-diversified portfolio across different sectors and asset classes to mitigate risk.

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Investing involves inherent risks, so thorough research is essential. Here's where FMP's Company Rating API comes in:

• Data-Driven Insights: Get objective ratings for any publicly traded company based on financial statements, discounted cash flow analysis, and key financial ratios.
• Beyond Market Predictions: Go beyond analyst forecasts and gain a clear understanding of a company's financial health and growth potential.
• Informed Investment Strategy: Utilize the API's data to make well-informed investment decisions even amidst changing economic forecasts.

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While Citi's forecast paints a potentially different picture than current expectations, it's just one piece of the puzzle. By staying informed, employing a strategic approach, and leveraging FMP's Company Rating API, you can make well-informed investment decisions moving forward.