Citi Predicts Goldilocks Scenario with 2025 Fed Rate Cuts

• Lyla Velez
• September 21, 2025
• Investment
• 0 Comments

Citi’s projections indicate significant implications for equities, risk assets, and possibly cryptocurrencies. This anticipated economic state could lead to increased market confidence and strategic shifts from investors.

Citi has forecasted that Federal Reserve’s anticipated rate cuts in 2025 will create a ‘Goldilocks’ economic state characterized by moderate inflation and low unemployment. Scott Chronert, Citi’s U.S. Equity Strategist, suggests these conditions will support growth and cyclical investment strategies while enhancing opportunities for risk assets.

“As we go further down this Fed rate path… our view all year has been we want to be barbelled between growth as our leading call with a cyclical bias.” — Scott Chronert, U.S. Equity Strategist, Citi

According to information from Citi, key players include Scott Chronert, who shared insights on potential shifts towards small and mid-cap equities due to expected earnings recovery by 2026. The bank emphasizes a barbell strategy, focusing on growth equities and high-yield bonds.

The implications of these predictions are profound, leading to adjustments in institutional portfolios focusing on U.S. equities and high-yield bonds. The crypto market, potentially, may also see benefits, particularly Bitcoin and Ethereum, given their history of performance amidst liquidity cycles.

If realized, the projected economic conditions in 2025 could mirror past patterns where rate cuts led to inflows into crypto assets. Historical precedents like 2019 and 2020 Fed cycles saw rallies in both equities and crypto markets, including DeFi tokens and Layer 1 blockchains.

Expectations of Fed policies could further stimulate macro liquidity conditions, impacting both traditional and digital assets. These changes could influence investor sentiment, fostering increased engagement in risk-prone sectors.