Barclays Predicts Prolonged High U.S. Interest Rates Due To Inflation Policies

According to Odaily, Barclays Bank has indicated that one factor contributing to the potential maintenance of high U.S. interest rates is the country's inflation policy. During the December meeting, some participants of the Federal Open Market Committee (FOMC) began to incorporate tariff expectations into their inflation forecasts. Furthermore, even among those who did not adjust their official predictions, many now perceive that the balance of inflation risks leans towards the upside. Although Federal Reserve Chair Jerome Powell did not explicitly address the extent to which the Fed considers tariff-related price increases, Barclays suggests that the anticipated inflation escalation due to tariffs in the latter half of 2025, especially against the backdrop of rising inflation rates in recent years, poses a challenge for the Fed to continue rate cuts. Barclays anticipates that the Fed will pause rate cuts after June next year and resume them around mid-2026, once the inflationary pressures from tariffs subside. In their baseline scenario, Barclays expects two 25 basis point rate cuts in 2026, with a terminal rate of 3.25-3.50%.