NEW YORK–Barclays now expects the Federal Reserve to raise interest rates by 25 basis points in September and again in December after Fed Chair Kevin Warsh delivered what the brokerage called a “notably hawkish” speech, Reuters reported.
Speaking Friday at the Fed’s Jackson Hole symposium, Warsh said policymakers would “have work to do” if they lacked confidence inflation was returning to the central bank’s 2% target. According to Reuters, Warsh said inflation remains too high, financial conditions are not restrictive and the labor market is consistent with full employment.
Barclays previously expected the Fed to hold rates steady through the remainder of 2026. The brokerage said Warsh’s remarks offered an implicit case for additional tightening, even as he continued to oppose providing explicit forward guidance, Reuters reported.
Barclays said it still expects monthly inflation readings to be “much softer” than the longer-term measures Warsh emphasized, but warned unfavorable base effects will impede progress through year-end. Markets now place a 60.4% probability on a September rate increase, according to CME Group’s FedWatch tool cited by Reuters, with the Fed scheduled to announce its next policy decision Sept. 16.
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