Barclays has revised its expectations regarding the timing of the next interest rate hike by the U.S. Federal Reserve.
Previously, the financial institution had anticipated a rate increase in December, but it now predicts that the Fed will implement a 25 basis point interest rate hike in January.
This shift in their forecast is attributed to several key factors.
One significant factor influencing this change is the recent release of October employment data by the Labor Department.
According to the report, the unemployment rate in the United States increased to 3.9% in October, marking the highest level since January 2022.
This rise in unemployment was a deviation from the previous month’s rate of 3.8% in September.
The softer-than-expected employment data has raised concerns about the overall health of the labor market and its potential impact on the broader economy.
Additionally, Barclays pointed to the dovish commentary from the Federal Reserve as another factor contributing to their revised forecast.
The central bank’s remarks and statements have suggested a more cautious and patient approach to monetary policy, emphasizing the need to carefully consider economic conditions before implementing further rate hikes.
In a note dated November 3, economists at Barclays stated, “We continue to think the FOMC (Federal Open Market Committee) will need to proceed with additional tightening and will have to maintain a higher rate path than expected by the market, with no rate cut prior to September 2024.”
This statement underscores their belief that the Fed will continue to pursue a policy of gradual tightening in the coming months.
In summary, Barclays’ revised outlook anticipates a 25 basis point interest rate increase by the U.S. Federal Reserve in January, rather than December as previously expected.
This adjustment is primarily based on the softer employment data for October and the cautious stance taken by the Federal Reserve in its recent communications.
Barclays continues to emphasize the importance of ongoing monetary policy tightening by the Fed in the near term, with no rate cuts expected until September 2024.