[Citi: Reasons for Rate Hikes Have Disappeared, Fed Expected to Resume Rate Cuts in October] BlockBeats News, July 5 — Citi Research stated in its U.S. Economic Weekly report released on July 2 that the U.S. non-farm payroll data for June showed significant weakness, strongly refuting the necessity for further rate hikes. Citi believes that several factors previously supporting a hawkish stance, including rising oil prices, accelerating wage growth, and core PCE above target, have all dissipated, indicating that 'the reasons for rate hikes have disappeared.' Data shows that U.S. non-farm payrolls in June increased by only 57,000, far below expectations, and the data for the previous two months was revised down by a total of 74,000. After revisions, the average monthly non-farm payroll growth over the past three months dropped to approximately 111,000, a sharp decline from the pre-revision level of over 180,000. The unemployment rate in June fell from 4.296% to 4.189%, but Citi believes this was mainly due to the labor force participation rate dropping from 61.8% to 61.5%. If the participation rate had remained unchanged, the actual unemployment rate would have risen to above 4.5%. On inflation, Citi noted that multiple factors are collectively suppressing price pressures. Oil prices have fallen back to pre-conflict levels, and July CPI and PCE data are expected to show month-on-month declines. Additionally, a further slowdown in housing rents will drag down core CPI and core PCE. Moreover, revisions to the core PCE methodology will adopt more reasonable price adjustments for AI-related goods. Citi estimates that after the revisions, the year-on-year growth rate of core PCE could be lowered by 20 to 30 basis points, which will be officially reflected in September. Citi maintains its baseline forecast, expecting the Federal Reserve to hold rates steady at the July and September FOMC meetings, with the first rate cut of 25 basis points occurring at the October 28 meeting, followed by another 25 basis point cut in December, bringing the federal funds rate range down to 3.0% to 3.25% by year-end. Citi also predicts that the Fed will cut rates three more times in 2027, with the terminal rate range at 2.75% to 3.0%.