Barclays expects US Fed to cut interest rates three times in 2025, by 25 bps each in September, October, and December versus prior forecast of two 25 bp cuts in September and December

Barclays expects US Fed to cut interest rates three times in 2025, by 25 bps each in September, October, and December versus prior forecast of two 25 bp cuts in September and December

Barclays economists have revised their outlook for U.S. Federal Reserve interest rate cuts in 2025. The bank now expects the Fed to lower interest rates three times, by 25 basis points each in September, October, and December, compared to their prior forecast of two 25 basis point cuts in September and December [1].

The shift in expectations comes amidst growing concerns about the U.S. economy. Barclays' "tipping points" model now places odds of a recession within the next two years at 50%. This model suggests that the underlying pace of U.S. growth has decelerated to a pace that makes it vulnerable to a recession [1].

The latest jobs report, released in August, showed weaker-than-expected job growth and revisions that reduced May and June payrolls by a combined 258,000. This has led some economists to sound the alarm about the economy's potential to enter a recession. Federal Reserve Chair Jerome Powell has also acknowledged the risk of low employment numbers being higher than the risk of high inflation [1].

The revised forecast by Barclays aligns with Wall Street traders' expectations. They anticipate that the Fed will lower interest rates later this month to stimulate the economy, given the recent slowdown in job growth and economic indicators [1].

As the economy navigates through these uncertain times, investors and financial professionals are advised to stay informed about the Fed's policy decisions. The next monthly employment report, due on September 5, will provide further insights into the economic landscape and potentially influence the Fed's rate decisions [1].

References:
[1] https://finance.yahoo.com/news/us-economy-likely-stalled-50-103000908.html