(Reuters) - Citigroup has pushed back its U.S. rate cut forecast to September from July and now expects three cuts this year instead of four, after a stronger-than-expected May jobs report in an otherwise cooling labor market.

The Wall Street brokerage anticipates 75 basis points (bps) of cuts this year in three equal tranches in September, October and December, revising its earlier forecast of 100 bps of cuts.

The brokerage also forecast two rate cuts of 25 bps each in January and March of 2026.

The Federal Reserve's last rate cut was in December 2024, when it reduced the key lending rate by 25 bps.

U.S. non-farm payrolls increased by 139,000 jobs last month after a downwardly revised rise of 147,000 in April, data showed. Economists polled by Reuters had estimated May payrolls to rise by 130,000 jobs.

The U.S. central bank is expected to keep interest rates unchanged at its meeting next week, while traders have priced in close to two 25-bps cuts by December.

On Friday, Citi lifted its S&P 500 year-end target to 6,300 from 5,800 earlier, expressing renewed optimism in corporate earnings resilience and the accelerating momentum of artificial intelligence-driven growth.

The benchmark S&P 500 index closed above 6,000 for the first time since late February on Friday.