Update 1 - Impacted by unexpected inflation data, Citi turns hawkish on the Federal Reserve, expects a rate hike in December.

Full update, including background information and analyst comments

Reuters, October 14 - Citigroup announced on Wednesday that, given the U.S. consumer inflation data for September (link) far exceeded expectations, it expects the Federal Reserve will raise interest rates by 25 basis points in December.

Previously, the brokerage was the only institution with a different view, having predicted that the Federal Reserve would not adjust interest rates again this year, despite widespread expectations in financial markets (link) for a rate hike in December.

Citigroup stated it expects, after the Federal Reserve raises rates in December as broadly anticipated by the market, the policy rate will remain unchanged; currently, the probability for a rate hike in December is priced at around 94%. Citigroup anticipates that rate cuts will not begin until June 2027.

Data shows that driven by surging gasoline prices, consumer inflation accelerated in September. Price pressures have extended beyond the energy sector , sparking market concerns that core inflation may remain elevated.

According to CME Group's FedWatch tool, interest rate futures linked to the Federal Reserve's policy rate indicate a 47.1% probability of a rate hike at the October 27–28 meeting, up from around 22% before the inflation data was released.

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