Barclays Bets Against Fed Rate Cuts Amid Rising Energy Prices

Barclays predicts no interest rate cuts from the U.S. Federal Reserve this year due to persistently high energy prices from the Iran war. The brokerage had initially anticipated a rate cut but now sees inflation risks as a significant deterrent amid divided forecasts among global brokerages.

Barclays has joined a growing number of brokerages anticipating no policy easing from the U.S. Federal Reserve this year, attributing the stance to persistent high energy prices fueled by the Iran war, which are expected to keep inflation elevated.

The British brokerage had initially predicted a 25-basis-point rate cut in September 2026 and maintained a forecast for a quarter-point reduction in March 2027. However, global brokerages are revising their early-year expectations of U.S. interest rate cuts, with concerns over inflation risks linked to ongoing geopolitical tensions making policymakers cautious.

Recently, the Federal Reserve left interest rates unchanged in its most divided decision since 1992, highlighting deepening worries about the impact of higher energy prices on the economy. Despite these challenges, Barclays sees potential growth from increased business investment driven by energy exploration and AI-related expenditure.