February inflation data in the US fell below expectations, prompting a reshaping of forecasts for Fed rate cuts, notably from Barclays.
Two Rate Cuts in 2025
Barclays increased its forecast for Fed rate cuts in 2025 from one to two, citing weaker labor market conditions. Barclays analysts expect rate cuts in June and September 2025, each by 25 basis points. Previously, only a 25 basis point cut in June was predicted. A quote from Barclays noted: "Weaker labor market forces us to make another rate cut despite higher inflation." After the last cut in September 2025, a long break is expected until March 2026.
No Rate Cuts This Year
Despite Barclays doubling its forecast for 2025, the inflation data did not impress Nomura economists. They believe the Fed will not cut rates this year. Components of the consumer price index, more critical to PCE inflation, came in stronger than expected, potentially pushing the Fed towards a more hawkish stance.
When is the Next FED Meeting?
The Fed will announce its March rate decision on the 19th. Rates are expected to remain unchanged.
Forecasts from banks and economists diverge regarding the Fed's future policy following inflation data release. Barclays sees potential for future rate cuts, while Nomura maintains caution. These varied forecasts highlight the complexity of the current economic climate and the uncertainty surrounding the Fed's next steps.
