Barclays bets on no Fed cuts
- Barclays dropped its call for a September 2026 Fed cut and now expects no easing this year, blaming Iran-war energy shocks for stickier inflation. (money.usnews.com) - The firm kept a March 2027 quarter-point cut in place; traders now see about a 78.7% chance rates stay unchanged by December. (money.usnews.com) - That matters because Wall Street’s higher-for-longer view is hardening just after the Fed’s most divided decision since 1992. (money.usnews.com)
Interest rates are back to being an energy story. Barclays just scrapped its forecast for a September 2026 Fed cut and now thinks the Federal Reserve will not(money.usnews.com)ed was hoping price pressures would cool. That pushes the whole market a step further toward a “higher for longer” view. (money. ([money.usnews.com)at changed today? Barclays changed its call on Monday, May 4. The bank had been expecting one 25-basis-point cut in September 202(money.usnews.com) new Fed move, but a fresh shift in Wall Street’s map of where rates are headed. (money.usnews.com) ### Why did Barclays change its mind? Basically, Barclays thinks the inflation shock from higher energy prices will last longer than investors had assumed. The bank’s note says a more prolonged oil-price pat(money.usnews.com)gy. If energy costs are bleeding into the rest of the economy, the Fed cannot easily look through them. (money.usnews.com) ### Why does oil matter so much to the Fed? Oil is not just a gas-station problem. It hits shipping, airlines, c(money.usnews.com)rs are paying more to fill up and businesses are paying more to move goods, inflation can stay sticky even if demand elsewhere is softening. That is the trap Barclays is pointing at. (money.usnews.com) ### Is Barclays out on its own? No — and that is why this call matters. Reuters says other brokerages have also backed away from(money.usnews.com) from scratch. It is joining a broader retreat from the idea that cuts were more or less on schedule. (money.usnews.com) ### What is the Fed signaling? The Fed itself did not cut at its latest meeting, and that decision was unusually divided. The split was the most pronounced since 1992, which tells you officials(money.usnews.com)ivided, outside forecasters get more cautious, not less. (money.usnews.com) ### What are markets pricing now? Markets have moved the same way. Barclays pointed to CME FedWatch pricing showing roughly a 78.7% probability of no change in rates by year(money.usnews.com)e burden of proof is on anyone calling for it soon. (money.usnews.com) ### What could break this view? The catch is that Barclays did leave itself an escape hatch. If unemployment suddenly jumps, the bank says the Fed would probably cut faster and more aggressively. In(money.usnews.com)ges fast. (money.usnews.com) ### Bottom line This is really a story about the Fed losing room to relax. Barclays is saying the inflation fight is not finished, even if growth slows a bit. For investors and businesses, that means planning for borrowing costs to stay high longer than they expected just a few months ago.
