Barclays Predicts Fed to Maintain Rates and Potentially Cut in September

Summary

Barclays expects the Federal Reserve to maintain interest rates at 3.5%-3.75% during this week’s meeting, with a potential 25bps rate cut projected for September 2026 FX678. Despite a 100% market probability of a hold this week due to 3.3% inflation, Barclays anticipates that cooling demand will eventually allow for policy easing FX678.

Impact Analysis

So Barclays is basically telling us the Fed is in a ‘higher for longer’ trap but is eyeing a September exit. The fascinating part is the divergence: the money markets are only pricing in a measly 10bps cut for the year, while Barclays is holding out for a full 25bps move in September FX678. They’re betting on a disinflationary trend that hasn’t quite shown up in the 3.3% March CPI data yet FX678.

I’m wary of the ‘patience’ narrative here. With Goldman and Citi flagging oil risks up to $150 due to Middle East tensions, the energy shock could easily derail this timeline JIN10. If Barclays is right, there’s a massive repricing coming for bonds, but if the energy spike persists, that September window slams shut. This feels like a classic ‘hope vs. reality’ setup. Bottom line: The market is misreading the potential for a hawkish surprise if Powell uses his ‘last meeting’ to cement a legacy of inflation fighting Businesstimes News+ 2. I’d stay defensive on duration and watch for a USD breakout if the Fed’s statement leans into the energy risk.