Barclays maintained its expectation that the Fed will cut interest rates in 2026.
The Fed is expected to cut interest rates by 25 basis points twice in 2026, in March and June, according to a report published by the bank’s U.S. economists. Barclays argued that there was a high risk that rate cuts would be delayed compared to this base case.
The report noted that the minutes of the Fed’s December monetary policy meeting were consistent with this expectation, and that interest rates were likely to be left unchanged at the January meeting. “The Federal Open Market Committee needs time to assess the impact of recent rate cuts,” economists said.
Meanwhile, Mark Zandi, chief economist at Moody’s Analytics, argues that labor market weakness, inflation uncertainty and political pressure will push the Fed toward more aggressive rate cuts in the first half of 2026. The central bank could cut interest rates by 25 basis points three times in the first half of this year, Zandi said.
“The main reason for further monetary easing will be the weakness in the job market, especially in early 2026,” Zandi said in his 2026 outlook. He noted that changes in trade and immigration policies are delaying companies’ hiring decisions, and that job growth will remain weak until these uncertainties are resolved. He added that if unemployment continues to rise, the Fed will likely resort to lowering rates.
However, market expectations suggest a more gradual easing. Market prices are predicting two rate cuts, with the first expected as early as April and the second around September, according to CME FedWatch data.
The forecast, which reflects the individual expectations of Fed officials, suggests there may be only one rate cut through 2026. Minutes from the December meeting revealed that a further rate cut was narrowly avoided and that further easing may be carried out at a moderate pace.
*This is not investment advice.
