Barclays: Uncertainty about the Fed's interest rate path will increase if U.S. inflation expectations get out of control

Barclays economists said the Fed's interest rate path looked uncertain and that the Fed could cut rates less or no more this year if there was evidence that inflation expectations were becoming erratic. The FOMC may be reluctant to cut rates significantly under stagflationary pressures, they wrote in a note. But they said it could also lead to bigger cuts if the labour market weakened more significantly and tariffs had a weaker transmission effect on inflation. Barclays still expects the Fed to cut rates by 25 basis points each in June and September. The agency expects another 25 basis points of rate cuts in June and September, depending on the FOMC seeing a sharp slowdown in monthly inflation as tariff-related pressures abate.