Barclays expects the Federal Reserve to implement another 25-basis-point rate cut in December, based on insights from the minutes of the November 6-7 Federal Open Market Committee (FOMC) meeting.
In a note released Wednesday, the bank highlighted that the minutes reflect a Fed leaning toward gradual easing, with future moves depending on developments in the labor market and inflation trends.
The minutes revealed a shift from the 50-basis-point “recalibration” in September to a more cautious approach aimed at aligning the policy rate with a neutral stance. This adjustment reflects a perception that risks to employment and economic activity have diminished.
“Such gradualism allows the committee to adapt policy as the balance of risks evolves,” Barclays noted, while acknowledging lingering uncertainties around the neutral policy rate.
Participants expressed confidence in the inflation outlook, citing factors like reduced business pricing power, stable inflation expectations, and easing wage pressures. However, a few participants voiced concerns about the possibility of prolonged disinflation.
Barclays believes the upcoming November payrolls report will play a crucial role in confirming the December rate cut. “The outcome will likely depend on the strength of the rebound in payroll employment,” the bank stated.
Looking ahead, Barclays projects two additional 25-basis-point cuts in 2025—in March and December—assuming no major disruptions from tariffs or policy changes. The forecast also includes two further cuts in 2026, in June and September, potentially bringing the target range to 3.25%-3.50% by the end of that year.
While the FOMC minutes avoided direct commentary on potential policies from the incoming Trump administration, Barclays noted a subtle acknowledgment of risks tied to sustaining recent supply-side gains, which could pose challenges in the future.
