Barclays Predicts Commencement of Regular Interest Rate Reductions in March: Report

Barclays Expects Federal Reserve to Begin Rate Cuts in March

According to analysts at Barclays, the Federal Reserve is expected to reverse its hawkish monetary policy early this year. The analysts predict that the Personal Consumption Expenditures (PCE) inflation indicator will average 1.9% for the last six months of 2023. The PCE is the preferred inflation indicator for the Federal Reserve.

Anticipated Monetary Campaign

Barclays analysts believe that with the PCE dropping within the Fed’s goal of 2% inflation, the Federal Open Market Committee (FOMC) will start a more accommodative monetary campaign in March. They expect rate reductions of 25 basis points at every other FOMC meeting, leading to a drop in the Fed funds rate to 4.25% to 4.50% by the end of the year.

Rationale and Forecast

The rate cut projection by Barclays is based on lower inflation and an expectation of continued moderation in inflation measures. The analysts emphasize that their forecast does not reflect political considerations but is focused on economic factors and the outlook for inflation. Barclays has moved up its rate cut forecast from June to March.

Bitcoin and Interest Rates

Investor Jan van Eck, CEO of VanEck, highlights falling interest rates as a key driver behind potential gains for Bitcoin. He explains that Bitcoin and gold behave similarly in relation to interest rates and that both have been rallying recently due to macroeconomic factors. At the time of writing, Bitcoin is valued at $42,668.

Hot Take: Barclays Forecasts Rate Cuts Starting in March

Barclays analysts are predicting that the Federal Reserve will initiate a series of rate cuts starting in March. They expect the Fed funds rate to drop to 4.25% to 4.50% by the end of the year. This forecast is based on the Personal Consumption Expenditures (PCE) inflation indicator dropping within the Fed’s target range. The analysts believe that the Fed will make its rate decisions based on economic considerations and the outlook for inflation, rather than political factors. Meanwhile, investor Jan van Eck suggests that falling interest rates will contribute to potential gains for Bitcoin, as both Bitcoin and gold are influenced by macroeconomic trends.