Citigroup Aligns Forecast with Peers

(Reuters) – Citigroup (NYSE:C), once the sole Wall Street brokerage predicting a 50 basis point rate cut by the U.S. Federal Reserve, now expects a quarter point reduction at December's policy meeting.

Citigroup adjusted its forecast after Friday's data revealed nonfarm payrolls rose by 227,000 jobs last month, up from an upwardly revised 36,000 in October. Economists had anticipated a gain of 200,000 jobs, contrasting with the initial report of a 12,000 increase in October.

Job growth saw a significant surge in November, recovering from previous disruptions caused by hurricanes and strikes. However, the unemployment rate rose to 4.2%, suggesting an easing labor market that indicates the Fed could likely cut interest rates this month.

Significant brokerages such as Morgan Stanley (NYSE:MS) and Goldman Sachs reiterated their expectation of a 25-basis-point interest rate cut by the Fed in December following the jobs report.

Citigroup analysts noted, "The report was not quite soft enough for the Fed to cut 50bp as we had projected for December, but a 25bp cut in December appears very likely." They further indicated, "We expect the Fed to continue to cut in 25bp increments at each upcoming meeting to a terminal policy rate of 3.00-3.25%."

Additionally, in a separate note dated December 6, Citigroup set a 2025 year-end target for the S&P 500 index at 6500, and maintained a positive outlook on U.S. equities heading into 2025.