Citi switches first Fed rate cut call to September from July after hot jobs data

Citi made an adjustment to its forecast for the U.S. Federal Reserve's monetary policy, moving its expectation for the initial rate cut from July to September.

This change comes in response to the May jobs report, which revealed an addition of 272,000 new jobs, which crushed consensus estimates.

The brokerage and research firm now anticipates a total of 75 basis points in rate reductions to occur in September, November, and December.

"But the jobs report does not change our view that hiring demand, and the broader economy, is slowing and that this will ultimately provoke the Fed to react with a series of cuts beginning in the next few months," Citi economists said.

The household survey, a component of the broader employment report, suggests a less optimistic outlook, with household employment falling by 483,000.

This decline contributed to the unemployment rate's rise to 4.0%, even as labor force participation decreased.

Following today's jobs report, Fed swaps no longer fully price in a rate cut before December, according to Bloomberg's data.