Fed will deliver another 25bp cut in December, Barclays says

Investing.com — Barclays anticipates that the Federal Reserve will implement another 25 basis point rate cut in December, according to insights from the minutes of the November 6-7 Federal Open Market Committee (FOMC) meeting.

The bank said in a note Wednesday that the minutes reveal a Fed inclined toward gradual easing, contingent on labor market developments and inflation trends.

The minutes indicated a shift from September’s 50bp “recalibration” to a more measured approach, with the committee now focused on moving the policy rate toward a neutral stance.

This adjustment was underpinned by the perception that downside risks to employment and activity had lessened.

“Such gradualism would allow the committee to adjust policy to changes in the balance of risks,” Barclays (LON:BARC) noted, while uncertainties remain regarding the neutral policy rate.

Confidence in the inflation trajectory was evident, with participants citing several factors supporting the outlook, including “waning business pricing power, well-anchored inflation expectations, and diminishing wage pressures.”

However, Barclays noted that a couple of participants expressed concerns that disinflation could take longer than anticipated.

The upcoming November payrolls report will likely play a pivotal role in cementing the December rate cut, according to the bank.

“This outcome likely hinges upon the magnitude of the bounceback in payroll employment,” Barclays explained.

Looking ahead, Barclays projects two additional 25bp cuts in 2025—one in March and another in December—assuming no major disruptions from tariffs or policy shifts.

Beyond that, the forecast includes two further cuts in 2026, in June and September, which would lower the target range to 3.25%-3.50% by the end of that year.

While the FOMC avoided direct speculation on incoming Trump administration policies, Barclays believes the minutes hinted at potential challenges tied to the sustainability of recent supply-side gains, which could lead to heightened tensions in the future.