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Economy April 9, 2026 08:08 AM

Barclays Sees Fed Holding Rates Through September as Inflation Concerns Rise

Bank cites FOMC minutes showing inflation worries linked to energy-driven price surge, but employment risks temper hawkish push

By Caleb Monroe
Barclays Sees Fed Holding Rates Through September as Inflation Concerns Rise

Barclays expects the Federal Reserve to keep interest rates unchanged until September 2026, citing the March FOMC minutes that highlighted elevated inflation concerns tied to a recent energy price surge. While some participants left the door open to hikes, the predominance of downside employment risks and repeated references to eventual easing underpin Barclays' projection for rate cuts starting in September 2026.

Key Points

  • Barclays expects the Fed to keep rates on hold until September 2026, followed by a 25 basis point cut and another cut in March 2027.
  • March FOMC minutes showed increased concern about elevated inflation and upside risks driven by a surge in energy prices linked to the conflict in the Middle East, while most participants saw employment risks as skewed to the downside.
  • Barclays anticipates core inflation to ease month-on-month after April if oil prices partially reverse, and expects real consumer spending to slow in the second half of the year.

Summary: Barclays is standing by its forecast that the Federal Reserve will maintain its current policy rate through September 2026. The bank's read of the March 17-18 FOMC minutes points to heightened concern among participants about inflation and upside risks driven by a jump in energy prices related to the conflict in the Middle East, but the minutes also reflect broad worries that employment is a downside risk which tempers an outright hawkish shift.

In a note summarizing the FOMC minutes, Barclays analyst Marc Giannoni said the discussion revealed "participants' increased concerns about elevated inflation and upside inflation risks, amid the surge in energy prices resulting from the conflict in the Middle East." That elevated inflation risk, Giannoni wrote, was clearly present in the committee's deliberations.

At the same time, Giannoni emphasized that most participants saw employment risks as skewed to the downside. That concern about the labor market narrowed the appetite for a more aggressively hawkish stance. The minutes showed some officials favoring two-sided guidance - which would leave the possibility of further rate hikes open - but the overall tenor remained aligned with a path toward eventual easing.

Barclays retained its baseline forecast calling for a 25 basis point cut in September 2026, followed by a second 25 basis point cut in March 2027. The bank notes that this timing and sizing are consistent with the median projections reflected in the Fed's dot plot.

The firm expects core inflation to moderate on a month-on-month basis after April, assuming a partial reversal of the recent oil price spike. Barclays also anticipates that real consumer spending will slow in the second half of the year, a development that would bear on demand-side inflation pressures and household financial conditions.

Giannoni highlighted the balance of risks around the forecast. The risks are tilted toward delayed rate cuts if inflation remains stronger or more persistent than currently expected; conversely, a sudden uptick in unemployment could accelerate and intensify the Fed's easing cycle.

Context limitations: This article strictly reflects Barclays' interpretation of the March FOMC minutes and the firms forecasts as presented. It does not introduce additional data or outside analysis beyond those points.

Risks

  • If inflation proves stronger or more persistent than expected, the Fed would likely delay cuts - affecting interest-rate-sensitive sectors including housing and consumer credit.
  • A sudden rise in unemployment could force the Fed into a faster and more aggressive cutting cycle, impacting labor-sensitive sectors and consumer-facing businesses.
  • Energy price volatility tied to the conflict in the Middle East could reignite inflationary pressures, influencing markets exposed to commodity costs and corporate margins.

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