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Barclays Predicts U.S. Interest Rates to Remain High Due to Inflation Policy
According to PANews, Barclays Bank has indicated that one of the factors contributing to the potential for U.S. interest rates to remain elevated is the country's inflation policy. During the December meeting, some participants of the Federal Open Market Committee (FOMC) began incorporating tariff expectations into their inflation forecasts. Even among those who did not officially adjust their predictions, many now perceive the balance of inflation risks to be skewed upwards.
Although Federal Reserve Chair Jerome Powell did not explicitly address the extent to which the Fed views tariff-related price increases, Barclays suggests that the anticipated inflation surge due to tariffs in the latter half of 2025, especially against the backdrop of rising inflation rates in recent years, poses a challenge for continued rate cuts by the Fed. Barclays anticipates that the Fed will pause rate cuts after June next year and resume them around mid-2026, once the inflationary pressures from tariffs subside.
In their baseline scenario, Barclays expects two rate cuts of 25 basis points each in 2026, with a terminal rate of 3.25-3.50%.
Although Federal Reserve Chair Jerome Powell did not explicitly address the extent to which the Fed views tariff-related price increases, Barclays suggests that the anticipated inflation surge due to tariffs in the latter half of 2025, especially against the backdrop of rising inflation rates in recent years, poses a challenge for continued rate cuts by the Fed. Barclays anticipates that the Fed will pause rate cuts after June next year and resume them around mid-2026, once the inflationary pressures from tariffs subside.
In their baseline scenario, Barclays expects two rate cuts of 25 basis points each in 2026, with a terminal rate of 3.25-3.50%.
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