Barclays bets on no Fed cuts
- Barclays on May 4 dropped its last expected 2026 Fed cut, saying the central bank now likely stays on hold all year. - The key change is specific: Barclays had penciled in a 25-basis-point September cut, and now still sees the first cut only in March 2027. - This matters because oil-driven inflation is colliding with an already split Fed and a market leaning toward no 2026 easing.
Barclays just made a clean break with the old rate-cut story. On May 4, the bank said it no longer expects the Federal Reserve to cut rates at all in 2026. The reason is simple, but not small — energy prices have stayed high for long enough that inflation may not cool the way the Fed needs. That turns a “maybe one cut later” outlook into “probably none this year.” ### What exactly changed? Until recently, Barclays still expected one 25-basis-point cut in September 2026. Now that call is gone. The bank kept its forecast for a quarter-point cut in March 2027, which tells you the shift is not “higher forever.” It is more like “the Fed has to wait longer than we thought.” ### Why are oil prices driving this? Because energy leaks into everything. Gasoline is the obvious one, but higher oil and fuel costs also raise shipping, airline, manufacturing, and food costs. The Fed’s April 29 statement explicitly said inflation is now central to the inflation path. ### Why does that block rate cuts? Fed cuts usually come when inflation is convincingly heading back toward target or when growth is weakening enough to force support. The catch is that an energy shock can do the worst of both at once — keep prices hot while also squeezing consumers. If inflation stays in a bind. ### Is Barclays out on its own? No — that is what makes the call matter. Reuters’ report described Barclays as joining a growing list of brokerages now expecting no easing this year. So this is not one house making a dramatic solo bet. It is part of a broader Wall Street retreat from the earlier idea that 2026 would bring a smooth easing cycle. ### What is the Fed signaling right now? The Fed is signaling discomfort, not clarity. At its April 29 meeting, officials held rates at 3.50% to 3.75%, and the vote was the most divided since 1992. The statement kept a line that inflation is elevated and less on hopeful easing narratives. ### What are markets pricing in? Markets have moved in the same direction, even if not every pricing snapshot matches Barclays exactly. Reuters noted that traders were already betting on no rate cuts in 2026 after the April Fed meeting. CME FedWatch also shows how the market is tracking meeting-by-meeting — the easy-money story has thinned out fast. ### Why should anyone outside bond desks care? Because “no cuts” means borrowing costs stay higher for longer across the economy. That can keep pressure on mortgages, credit cards, auto loans, and business financing. It also changes how investors further into 2027, not pulled closer. ### Bottom line This story is
