When Does Barclays Expect the Next US Fed Rate Cut?

• Barclays previously expected a rate cut in June, followed by another in December. 
• The change reflects an upward revision to Barclays' inflation outlook and increased upside inflation risks resulting from the conflict with Iran. 
• The ongoing Iran war has led to oil prices shooting up beyond $100 per barrel. 

.Barclays has pushed back its expectations of the next interest rate cut by the Federal Reserve by two months citing the Iran war. 

Barclays’ chief U.S. economist Marc Giannoni pushed back the firm's Federal Reserve rate cut expectations to September from June. The change reflects an upward revision to Barclays' inflation outlook and increased upside inflation risks resulting from the conflict with Iran, the economist told investors in a research note. 

The firm now expects a 25 point rate cut in September to 3.25%-3.50%, followed by another 25 point reduction in March of 2027. Barclays previously expected a rate cut in June, followed by another in December. 

"If inflation pressures are more protracted than anticipated, we would expect the FOMC to delay rate cuts even further," the economist says.

Inflation Woes Heightened

The ongoing Iran war has led to oil prices shooting up beyond $100 per barrel as the critical oil shipping route of Strait of Hormuz has been blocked by Iran and the traffic has been on standstill, it has led to rise in prices of gasoline and other key products that has led to sharp increase in inflation worries. 

Several oil vessels were hit in the area. U.S. Treasury Secretary Scott Bessent said escorts for vessels through the vital Strait of Hormuz chokepoint would begin “as soon as militarily possible.” Iran’s new Supreme Leader Mojtaba Khamenei said late Thursday that the country would continue to block the shipping channel. 

Trump Getting Blamed For Gasoline Prices

About 48% of Americans are reportedly blaming U.S. President Donald Trump regarding the rise in gas prices, as per Morning Consult survey data showed to Axios. 

U.S. equities fell on Wednesday. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was down 0.3%, the Invesco QQQ Trust ETF (QQQ) dived 0.4%, while the SPDR Dow Jones Industrial Average ETF Trust (DIA) was flat. 

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