Wall Street is experiencing a divide regarding predictions for Federal Reserve rate cuts. Citigroup's chief US economist, Andrew Hollenhorst, maintains his projection for three rate cuts of 25 basis points each in September, October, and December 2026, totaling 75 basis points. This forecast stands in contrast to several major financial institutions, including Goldman Sachs, which have revised their expectations for fewer or no cuts after a robust jobs report for May 2026.
The jobs data revealed that the U.S. economy added 172,000 nonfarm payroll positions, exceeding what analysts anticipated. This unexpected strength in the labor market prompted banks to reconsider their views on monetary policy, with some shifting toward a less dovish stance.
Hollenhorst posits that this current labor market strength will not be sustainable and expects it to soften significantly over the next three months. Beyond labor conditions, he highlights a recent decrease in oil prices, which he believes reduces inflation risks and could create more room for the Fed to implement cuts.
What would these cuts mean for cryptocurrencies and other risk assets? A cycle of 75 basis points of easing beginning in September could markedly alter the monetary landscape. Typically, lower borrowing costs increase the appeal of riskier assets, thereby benefiting investments in Bitcoin, Ethereum, and the larger digital currency market.
This disparity between Citigroup and Goldman Sachs provides investors with a framework to analyze two contrasting economic scenarios. One scenario depicts an economy that is cooling off, prompting the Fed to adopt a more lenient approach. The other situation illustrates persistent economic growth, resulting in the Fed maintaining its current stance.
Furthermore, rate cuts traditionally lead to a weakened US dollar. A declining dollar can benefit Bitcoin, as many global investors perceive it as an alternative store of value. Should Citigroup’s forecast be accurate, a weaker dollar later in 2026 could serve as an additional driving force for the prices of digital assets.