Barclays: Expects the Fed to pause rate cuts after June next year until mid-2026

FXStreet 22 Dec - One of the factors that may keep the US Intrerest Rate at high levels, according to Barclays, is the US (inflation) policy. At the December meeting, some FOMC participants apparently began to reflect expectations of tariffs in their inflation forecasts. In addition, even among those who did not adjust their official forecasts, many now believe that the balance of inflation risks tends to pump. Although Powell did not explicitly answer the extent to which the Fed tends to view price levels related to tariffs as pump, we believe that it will be a challenge for the Fed to continue cutting interest rates, especially against the backdrop of rising inflation rates in recent years, especially in the case where tariffs are expected to exacerbate inflation in the second half of 2025. We expect the Fed to pause its rate cuts after June next year and resume cutting rates around mid-2026 after the inflationary pressures caused by tariffs dissipate. In our Benchmark, we expect two 25 basis point rate cuts in 2026, with the terminal Intrerest Rate at 3.25-3.50%.