Barclays Forecasts No Fed Rate Cuts Until March 2027

Barclays has abandoned its earlier call for Federal Reserve easing this year, now projecting the central bank will stay on hold throughout 2026 with the first rate cut pushed all the way to March 2027.

Oil Prices and Sticky Inflation Drive the Revision

The shift marks a significant hawkish turn for the British bank. Barclays joined a growing list of brokerages betting on no policy easing from the U.S. Federal Reserve this year, citing prolonged high energy prices linked to the Iran war that are likely to keep inflation elevated. Previously, Barclays had forecast a 25-basis-point rate cut in September 2026.

The revised outlook is underpinned by a sharp move higher in Barclays' oil price projections. Analyst Marc Giannoni told investors in a note that the revision reflects an updated oil price baseline from Barclays' energy strategist, who now projects Brent crude peaking at $115 per barrel in the current quarter before edging down gradually to $100 per barrel by the fourth quarter. WTI is projected to peak at $105 per barrel in the second quarter, averaging $93 per barrel for 2026.

Higher energy costs are feeding directly into inflation forecasts. Barclays now forecasts headline PCE inflation at 3.8% on a fourth-quarter-over-fourth-quarter basis in 2026, 0.7 percentage points faster than its prior projection, with core PCE inflation at 3.1%. "With core PCE inflation now projected above 3% y/y through the end of the year, with a monthly run-rate above 2.5% annualized and a resilient labor market, we no longer think the FOMC will be in a position to cut rates this year," Giannoni wrote.

The firm trimmed its 2026 GDP growth forecast by 0.3 percentage points to 2.1% but said the labor market should remain resilient, giving the Fed little justification for precautionary cuts.

Market Sentiment Quickly Aligning

Barclays is far from alone in this reassessment. Global brokerages have steadily pulled back from early-year expectations of two U.S. interest rate cuts in 2026, with forecasts sharply split between some easing and no cuts at all this year, due to war-related inflation risks that are making policymakers cautious. Last week, the Federal Reserve left interest rates unchanged in its most divided decision since 1992, on deepening concerns about higher energy prices percolating through the economy.

Real-time prediction market data from Kalshi reflects this shift in sentiment, with the probability of a 2026 rate cut collapsing to just 45% — a sharp reversal from earlier in the year when markets were pricing in multiple reductions.

Barclays expects the Fed to cut in March 2027 once it sees clear evidence inflation is returning toward its 2% target, with risks to the oil and inflation outlook still skewed to the upside if Strait of Hormuz disruptions persist. For risk assets including crypto, a prolonged period of restrictive monetary policy presents a meaningful headwind, as tighter financial conditions historically weigh on speculative and growth-sensitive investments.

Sources
Investing.com – Barclays pivots, says no Fed rate cuts in 2026
Reuters via Jefferson City News-Tribune – Barclays becomes latest brokerage to bet on no Fed rate cuts in 2026