BlockBeats news, December 22, Barclays Bank stated that one factor for the possibility of US interest rates remaining high is US (inflation) policy. In the December meeting, some FOMC participants clearly began to reflect expectations regarding tariffs in their inflation forecasts. Furthermore, even among those who did not adjust their official forecasts, many now believe that the balance of inflation risks tends to lean upward.
Although Powell did not explicitly answer to what extent the Federal Reserve tends to view the increase in price levels related to tariffs, we believe that in the context where tariffs are expected to exacerbate inflation in the second half of 2025, particularly against the backdrop of rising inflation rates in recent years, it will be a challenge for the Federal Reserve to continue cutting rates. We expect the Federal Reserve to pause rate cuts after June next year and resume them around mid-2026 after the inflationary pressures caused by tariffs dissipate. In our baseline, we expect two rate cuts of 25 basis points in 2026, with a terminal rate of 3.25-3.50%. (Jin Shi)