Fed Lifts Benchmark Rate to 3.75%–4.00%; Citi and Goldman Sachs Revise Outlooks

With crypto markets still focused on ongoing debate around the Clarity Act, the Federal Reserve on Wednesday raised its policy rate by 25 basis points to a 3.75%–4.00% target range, in line with expectations. The move marks the Fed's first rate increase since July 2023, as inflation remains above the central bank's 2% goal and economic activity stays resilient. Officials signaled another hike could be on the table later this year, prompting major U.S. banks to update their rate projections. Citi: No More Hikes This Year; Cuts Seen From Mid-2027 Citigroup expects the Fed to hold rates steady at its October and December meetings following the September increase. Citi also argues Wednesday's decision should be viewed as a recalibration rather than the start of a new tightening cycle. If inflation continues to cool in the October and December readings, Citi forecasts the Fed could resume rate cuts in June 2027. Under the bank's revised path, the first 25-basis-point cut would come in June 2027, followed by two additional 25-basis-point cuts in September and December 2027. Citi emphasizes that this scenario depends on U.S. inflation maintaining its downward trajectory, while policy is expected to remain tight in the near term. Goldman Sachs: Another 25 bps Hike Could Come in October After Wednesday's increase, Goldman Sachs now expects the Fed to raise rates by another 25 basis points in October, Reuters reported. An October move would represent a second consecutive hike. Goldman had previously expected no change after the September decision, but analysts said their outlook shifted after hawkish commentary from Fed officials underscoring the need for further tightening to return inflation to 2%. Goldman sees October as the most likely timing for the next hike. This is not investment advice. Continue reading: Fed raises interest rates, Citi and Goldman Sachs update forecasts—is a rate cut possible?