Barclays has revised its forecast for the US Federal Reserve’s next interest rate hike, now expecting the central bank to move in January instead of December.
This change in forecast is based on a number of factors, including softer-than-expected October employment data and dovish Fed commentary.
The October employment report showed that the unemployment rate rose to 3.9% last month, the highest level since January 2022.
This was seen as a sign that the labor market is starting to cool, which could give the Fed more leeway to slow the pace of its interest rate hikes.
In addition, Fed officials have been sounding more dovish in recent weeks. For example, Fed Governor Lael Brainard said in a speech on November 2 that the Fed should “be mindful of the risks of overtightening.”
This suggests that the Fed is becoming more cautious about raising interest rates too quickly, and that it may be willing to slow the pace of its rate hikes in the coming months.
Barclays’ revised forecast is in line with the expectations of many other economists.
A recent survey by Bloomberg found that the median forecast among economists is for the Fed to raise interest rates by 25 basis points in January, followed by another 25 basis point hike in March.
The Fed’s decision on when to raise interest rates will have a significant impact on the US economy and financial markets. If the Fed raises rates too quickly, it could lead to a recession. However, if the Fed waits too long to raise rates, it could allow inflation to spiral out of control.
The Fed is facing a difficult balancing act, and it is unclear how it will resolve it. However, Barclays’ revised forecast suggests that the Fed is becoming more cautious about raising interest rates too quickly. This could be a positive development for the US economy and financial markets.