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Fed Rate Cut Delayed: Middle East Conflict Fuels Inflation Fears
14 Mar
Summary
- Barclays now forecasts the first Federal Reserve rate cut in September 2026.
- Heightened inflation risks stem from the Middle East conflict.
- Traders anticipate only one rate cut by March 2027.
Barclays has joined Goldman Sachs in pushing back its projection for the U.S. Federal Reserve's initial interest rate cut of 2026 to September. This adjustment stems from heightened inflation risks, exacerbated by the conflict in the Middle East, which poses a significant threat to price stability.
The analysis suggests that unexpectedly persistent U.S. inflation, coupled with potential oil-driven price increases, makes it unlikely the Fed will achieve sufficient confidence in easing inflation to begin rate reductions by mid-2026. Barclays now anticipates only one 25-basis-point rate cut in 2026, with a further reduction projected for March 2027.
Traders' sentiment has also shifted, with current expectations pointing to a single Fed rate cut by March 2027, a notable change from earlier predictions of two cuts by the end of 2026. The Federal Reserve is expected to maintain current interest rates at its upcoming meeting on March 17-18, 2026.
