Barclays bets no Fed cuts 2026

Interest rates are supposed to turn on inflation and jobs. But right now oil is barging back into the story. Barclays told clients on Monday, May 4, that it no longer expects the Federal Reserve to cut rates at all in 2026, reversing an earlier call for a September cut because the Iran war could keep energy prices high and inflation stubborn. ### What exactly did Barclays change? Barclays scrapped its forecast for a 25-basis-point cut in September 2026 and now expects no Fed easing this year. It kept one quarter-point cut in March 2027. That sounds like a small tweak, but it is really a signal that Barclays thinks the inflation damage from higher energy prices will last longer than it thought even a few weeks ago. ### Why does oil matter so much here? Because oil hits the economy twice. First at the gas pump and in utility bills. Then, with a lag, in shipping, food, airfares, chemicals, and a lot of other prices. San Francisco Fed researchers said in April that makes the Fed reluctant to cut. ### Is Barclays alone? No. Reuters said Barclays joined a growing group of brokerages moving toward a no-cuts view for 2026. A separate Reuters roundup on April 30 said firms had been backing away from earlier expectations for two cuts, with Morgan Stanley among those dropping easing cuts” ### But didn’t the Fed still lean dovish? Somewhat — at least earlier. The March 17–18 Fed minutes showed officials still dealing with uncertainty around inflation and growth, not locking themselves into an aggressive easing path. And coverage of the latest oil-driven rethink from banks. ### What are markets pricing now? Futures markets are no longer confidently pricing a string of cuts. CME’s FedWatch tool shows traders watching each meeting as a live question rather than assuming a smooth easing cycle. The point is less the exact percentage on any one day and more the new pattern — conviction has faded, and every move in crude now matters more for rate expectations. ### Where does the pushback come from? The pushback is simple. If oil cools back down and the labor market softens, the Fed could still cut later this year. Reuters said UBS private-wealth strategist Brad Bernstein is in that camp. So this is not a clean consensus. It is a split between people who think the oil-driven inflation. ### Why should anyone outside markets care? Because Fed cuts are not trivia. They feed into mortgage rates, credit-card costs, auto loans, business borrowing, and stock valuations. When a big bank says “no cuts,” it is really saying households and companies may have to live with expensive money for longer — and that the next inflation scare may come from geopolitics, not overheating demand. ### Bottom line? The Barclays call matters less because one bank changed a forecast and more because it captures a broader turn. The Fed story for 2026 is no longer just about whether inflation is slowly cooling. It is about whether war-driven energy prices can keep policy tight even as growth gets shakier.