February inflation data released yesterday in the US came in below expectations. Following the CPI data, expectations about the possibility of the FED cutting interest rates were reshaped, and Barclays revised its estimate.
FED Will Cut Interest Rates Two Times, Then Start Again in March 2026!
Barclays raised its 2025 Fed rate cut expectation from one to two, citing softer labor market conditions despite tariff uncertainty, Reuters reported.
Barclays analysts said they expect the FED to cut interest rates twice in 2025, by 25 points each in June and September.
The bank had previously projected a 25 basis point cut in June.
“Weaker labor market forces us to make another rate cut despite higher inflation.”
Barclays analysts added that after the latest rate cut in September this year, the Fed will take a long break from rate cuts and expect it to restart the rate cut cycle in March 2026.
No Interest Rate Cut This Year!
While Barclays doubled its 2025 interest rate cut expectation following the inflation data announced yesterday, the data did not impress Nomura economists.
Accordingly, Nomura economists think that the Fed will not cut interest rates this year.
Despite the data coming in below expectations yesterday, Nomura analysts said that the components of the consumer price index (CPI), which have a higher weight in core personal consumption expenditures (PCE) inflation, came in stronger than they expected.
Economists said they expect the upward trend in PCE to continue, adding that this would lead the Fed to take a more hawkish stance in monetary policy and not cut interest rates.
When is the FED Meeting?
The FED will announce its March interest rate decision on Wednesday, March 19. The expectation is that interest rates will remain constant.
*This is not investment advice.
