Catenaa, Thursday, March 13, 2025- Barclays expects two quarter rate cuts this year, brokerage said on Thursday, with softer US labor market conditions.
The brokerage is expecting two quarter-point rate cuts in June and September. It had earlier projected one 25-basis point cut in June.
“The softer labor market causes us to add another rate cut, despite higher inflation,” Barclays analysts said.
It expects the demand for workers to diminish along with slowing labor market activity this year.
“We think that the relatively sharp slowdown in job gains will be accompanied by only a moderate rise in the unemployment rate, which would peak at 4.3% in October.” it added.
On Wednesday, US consumer prices increased to 2.8% year on year in February, which is less than expected after January showed 3% inflation.
Analysts at Barclays expect the first rate cut in June to “reflect indications of slower growth and rising unemployment” while the second rate cut in September to indicate “a rising unemployment rate and some signs of improvement in monthly inflation prints.”
Following the cut in September this year, Barclays expects the central bank to remain on an extended pause and resume its cutting cycle in March 2026.
Barclays also lowered its Q4/Q4 2025 growth projections to 0.7% from 1.5% expected earlier.
The Fed left its benchmark overnight interest rate in the 4.25-4.50% range in its January policy meeting, with Chair Jerome Powell saying there would be no rush to cut them again until inflation and jobs data made it appropriate.
The Federal Open Market Committee (FOMC) is scheduled to meet again on March 18 and 19.
