Barclays: If US inflation expectations get out of control, uncertainty about the Fed's interest rate path will increase

Barclays economists said that the Fed's interest rate path looks uncertain, and if there is evidence that inflation expectations are becoming unstable, the Fed may reduce or not cut interest rates this year. They wrote in a report that under stagflation pressure, the Federal Open Market Committee may be unwilling to cut interest rates significantly. However, they said that if the labor market weakens more noticeably, the transmission effect of tariffs on inflation is weaker, it may also lead to larger cuts. Barclays still expects the Fed to cut interest rates by 25 basis points in June and September this year. The institution expects another 25 basis point cut in June and September next year, depending on the FOMC seeing a significant slowdown in monthly inflation under reduced tariff-related pressure.