VIEW: Barclays Add An Additional Hike Into Their Forecast Profile

Barclays now “expect the FOMC to continue with 25bp hikes to the funds rate at the June meeting, which would lift the target range for the rate to 5.25-5.50%. This is 25bp higher than our prior forecast, which had anticipated a pause following 25bp hikes in March and May. The additional hike reflects our view that the Fed will need to see material slowing in labor market outcomes to convince itself that wages are on course to return to rates of increase consistent with 2% inflation, and that such evidence will not be evident until midyear.”

• “After the June increase, we now expect the FOMC to remain on hold until December, when we expect a 25bp cut. We not only believe that the Fed will need to implement a higher peak rate, but that it will need to hold rates higher for longer to prevent a resurgence of inflationary pressures from strong wage growth as disinflationary effects from goods and other influences play out. We continue to forecast a total of six cuts to the funds rate in 2024, which also lifts the end-2024 target range by 50bp, to 3.50-3.75%.”