Barclays projects US Fed to deliver 2 rate cuts this 2025

Barclays has lowered its expectations; now, it thinks the Federal Reserve will cut interest rates twice this year instead of once. This is due to unclear trade policy and the weakening U.S. job market.

Barclays analysts said, “The softer labor market causes us to add another rate cut, despite higher inflation.” It had earlier projected one 25-basis point cut in June. 

According to the analysts, the first rate cut in June will reflect indications of slower growth and rising unemployment. The second rate cut in September will reflect indications of a rising unemployment rate and some signs of improvement in monthly inflation prints.

After the September rate cut, Barclays thinks the central bank will take a long break and start cutting rates again in March 2026.

Demand for workers will go down – Barclays

Consumer prices in the U.S. rose less than expected in February. The consumer price index (CPI) increased 0.2% last month after increasing 0.5% in January. Economists had predicted the CPI would increase 0.3%.

Prices increased 0.2% on a “core” measure, which excludes the more volatile costs of things like gas and food. This was less than January’s 0.4% monthly gain and 3.1% over the previous year. This was the smallest annual increase in core CPI since April 2021.

It was also less than the 3.3% rise in core prices seen in the previous month and more than what the Bloomberg average expected. It was the first time since July that both the headline CPI and the core CPI showed that prices were rising less quickly. This is such a relief, considering the uncertainty around Trump’s policies.

Therefore, Barclays thinks that this year, the demand for workers will go down along with the slowing of the job market. They said, “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.”

Barclays also dropped its growth predictions for Q4/Q4 2025 from 1.5% to 0.7%.

Fed’s stance on interest rates 

Recently, Jerome Powell, the head of the Federal Reserve, said that the central bank is not in a hurry to lower interest rates because policy uncertainty is still making markets nervous and the outlook for the US economy unsure.

Powell said, “As we parse  the incoming information, we are focused on separating the signal from the noise as the outlook evolves […] We do not need to be in a hurry and are well-positioned to wait for greater clarity.”

The head of the central bank said in a Q&A session after his speech that the cost of being cautious is very low. 

According to Powell, the Trump administration is changing policies in many areas, such as trade, taxes, government spending, immigration, and rules. He also said that what will matter for the economy and the Fed’s interest rate policies is the net effect of these changes.

At its January policy meeting, the Fed kept the overnight interest rate between 4.25 and 4.50%. Chair Jerome Powell said the bank would wait to cut rates again until reports on inflation and jobs showed it was time. The next meeting of the Federal Open Market Committee (FOMC) is set for March 18 and 19.

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