Barclays has reversed an earlier forecast that had anticipated Federal Reserve rate cuts in 2026, now calling for policy to remain unchanged through that year and for the first easing to come as a 25-basis-point move in March 2027. The bank ties the shift to a higher oil-price trajectory that it says will slow the disinflation process.
In a note to investors, analyst Marc Giannoni said the updated view follows a revised oil-price baseline from Barclays' energy strategist. Under the new baseline, Brent crude is expected to peak at $115 per barrel in the current quarter before easing toward $100 per barrel by the fourth quarter, with a full-year average of $100 per barrel. West Texas Intermediate (WTI) is projected to peak at $105 per barrel in the second quarter and to average $93 per barrel across 2026.
Those oil-price assumptions feed into the bank's inflation outlook. Barclays now sees headline PCE inflation running at 3.8% on a fourth-quarter-over-fourth-quarter basis in 2026, which is 0.7 percentage points higher than its earlier projection. Core PCE inflation is forecast at 3.1% for the same period, 0.3 percentage points above the prior estimate.
Alongside the inflation revisions, Barclays trimmed its 2026 GDP growth forecast by 0.3 percentage points to 2.1%. Despite the slowing outlook for growth, the firm expects the labour market to remain robust, a dynamic that it says reduces the Federal Open Market Committee's impetus to move rates lower as a precaution.
Giannoni summarized the policy implication in the note: "With core PCE inflation now projected above 3% y/y through the end of the year, with a monthly run-rate above 2.5% annualized and a resilient labor market, we no longer think the FOMC will be in a position to cut rates this year."
Barclays projects the Fed will be ready to cut rates in March 2027, but it warns that risks to the oil and inflation outlook are skewed to the upside if disruptions in the Strait of Hormuz persist. Those upside risks could further delay disinflation and push any easing later or reduce its magnitude.
Implications: The revision links energy market developments directly to monetary policy timing, with consequences for fixed-income markets, energy-sector valuations, and interest-rate-sensitive sectors if elevated inflation persists.