Citi sees no Fed rate cuts until June 2027, crypto in trouble?

Citigroup has pushed its forecast for the Federal Reserve’s next interest rate cut to June 2027 after stronger US jobs data reduced concerns over the labor market, leaving Bitcoin and the crypto market facing the prospect of higher borrowing costs for longer.

Reuters reported that Citi had previously expected the Fed to cut rates in October and December 2026 and again in January 2027. The bank has replaced those calls with three reductions in June, September and December 2027 after August payrolls came in well above forecasts.

US employers added 162,000 jobs in August, compared with economists’ expectations of 53,000, while the unemployment rate remained at 4.1%. The monthly payroll gain was the strongest since March, and the labor force participation rate rose by 0.2 percentage point.

Earlier employment figures were revised higher as well. July payrolls were changed to a gain of 21,000 from a previously reported loss of 23,000, while the June figure was raised by 11,000.

Citi economists Andrew Hollenhorst and Veronica Clark said the figures suggested Fed officials would see employment conditions as broadly stable and focus more closely on inflation.

“The unemployment rate was unchanged and labor force participation rebounded noticeably,” they wrote.

Strong jobs data changed Fed expectations and hit Bitcoin

The jobs report quickly reached the crypto market as traders raised their expectations for tighter monetary policy.

Bitcoin fell below $80,000 following the August employment data, reversing from an intraday high around $81,370 as markets repriced the outlook for US interest rates. As crypto.news previously reported, BTC was trading near $79,600 after the release, down around 1.5% over 24 hours.

Rate futures at the time placed a 61% probability on a Fed hike at the Sept. 15 to 16 meeting, up from 52% before the employment figures were released, according to Reuters.

The Fed has since delivered that increase. Policymakers raised the benchmark rate by 25 basis points on Sept. 16, taking the federal funds target range to 3.75% to 4%. It was the central bank’s first rate hike since July 2023.

New projections released with the decision showed that 16 of 18 Fed officials expected at least one more rate increase before the end of 2026.

Citi’s revised forecast now places the first expected cut roughly nine months after the September hike. The bank had previously been among the more dovish forecasters on Fed policy, with its earlier projections calling for three cuts between October 2026 and January 2027.

Higher rates remain a pressure point for Bitcoin and crypto

Bitcoin has repeatedly reacted to changes in US interest rate expectations this year as inflation, employment and energy prices changed the path investors expected the Fed to take.

A stronger labor market gives policymakers less reason to lower borrowing costs to support employment, while persistent inflation has kept attention on the other side of the Fed’s dual mandate.

Inflation has remained above the central bank’s 2% target for more than five years. Fed officials have consequently kept open the possibility of tighter policy if monthly inflation readings fail to show sufficient moderation.

That backdrop has already produced periods of pressure across crypto markets. Ahead of the September Fed meeting, the global crypto market lost more than 2% as the probability of a 25 basis point rate increase moved above 92%. Bitcoin fell below $76,000 during the move.

Treasury yields and the US dollar can compete with risk assets for capital when investors expect rates to remain elevated. Crypto assets do not generate interest simply from being held, while higher yields on government debt can give investors another place to park capital.

Market behavior since the Fed meeting, however, has not followed a simple higher rates equals lower Bitcoin pattern.

Bitcoin has recovered despite the Fed rate hike

Bitcoin briefly moved toward $75,000 after the Sept. 16 decision but later recovered, eventually climbing above $86,000 as ETF demand returned, Treasury yields eased and short sellers were forced to close bearish positions.

The cryptocurrency briefly touched $87,000 this week, its highest level since late January. US spot Bitcoin ETFs recorded $433 million in net inflows on Sept. 18 after heavy withdrawals earlier in the week.

HashKey Group senior researcher Tim Sun said ETF inflows confirmed the rally instead of starting it, while the move through $82,000 triggered short covering that helped carry BTC higher.

BitGo Research has similarly argued that Bitcoin absorbed the Fed hike better than might have been expected. Research chief Greg Cipolaro pointed to Bitcoin’s recovery following both the Fed decision and the failed Senate cloture vote on the CLARITY Act.

The interpretation remains a market view rather than proof that Bitcoin has become insulated from monetary policy. BTC’s rebound coincided with several developments, including renewed ETF demand, falling Treasury yields, lower oil prices and short covering, making it difficult to attribute the move to one factor.

Citi’s new rate path therefore arrives as Bitcoin trades in a different environment from the one immediately following the August employment report. Markets have already absorbed one Fed hike, while policymakers have signaled that another increase remains possible before year end.

Fed Governor Christopher Waller and New York Fed President John Williams have said they favor holding rates steady as long as inflation continues to moderate on a monthly basis. Waller and Fed Governor Michael Barr have left the door open to further increases if incoming figures fail to show continued progress on prices.

Citi now expects the first reduction in June 2027, followed by cuts in September and December, replacing the three reductions it had previously forecast between October 2026 and January 2027.