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Barclays projects steady Fed rates through 2026 due to persistent energy-driven inflation, reversing prior cut expectations.
Barclays now anticipates the U.S. Federal Reserve will hold interest rates steady through next year, reversing a prior projection of a September 2026 rate cut. The brokerage attributes this extended pause to persistent inflation driven by elevated energy prices, complicating the central bank's path back to its 2% target [1].
| At a glance | |
|---|---|
| Forecast Date | May 4, 2026 |
| Prior Outlook | 25-basis-point cut in Sept 2026 |
| New Outlook | Rates steady through 2026 |
| Key Driver | Inflation above 2% target |
Barclays updated its forecast on May 4, 2026, scrapping a predicted 25-basis-point reduction in September 2026 in favor of a hold [1]. The firm now expects a reduction in March 2027, aligning with a broader reassessment among financial institutions as inflation continues to run above the Federal Reserve’s 2% target [1]. Elevated energy prices, specifically those linked to global supply disruptions, are cited as the primary factor complicating the policy environment [1]. Barclays analysts indicated that prolonged higher oil prices are expected to support both headline and core inflation measures, influencing personal consumption expenditures—the Fed's preferred benchmark [1].
Financial markets have adjusted rapidly to this outlook, with CME FedWatch data indicating traders assign a high probability that the Federal Reserve will maintain current rate levels through the end of 2026 [1]. This marks a departure from earlier in the year when participants anticipated multiple rate cuts. Consequently, Treasury yields have remained elevated due to reduced demand for longer-duration bonds, while the U.S. dollar has maintained strength against major currencies as higher relative rates support capital inflows [1]. The economic picture remains mixed, as consumer spending moderates due to higher costs while business investment in energy and infrastructure remains stable [1].
The revision underscores how external energy shocks are constraining the Federal Reserve's ability to pivot policy, extending a period of restrictive financial conditions until global supply chains stabilize.
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AI-assisted synthesis by the TrendWatcher Editorial Desk · sourced from 2 outlets · Jul 4, 2026 · How we report
The federal funds rate was last recorded at 3.75% as of July 2026.
No, Chair Kevin Warsh has stated that the central bank will no longer provide traditional forward guidance, opting instead to base decisions on incoming data.
The Fed uses the federal funds rate as a tool to control the money supply and maintain price stability, with a specific target of 2% inflation.
The next meeting of the Federal Open Market Committee is scheduled for July 28 and 29, 2026.