Barclays Shifts Hawkish on Fed, Sees Two Rate Hikes in 2026

Barclays has revised its interest rate forecast for the US Federal Reserve, shifting from a neutral to a hawkish stance. The brokerage now expects two rate hikes in 2026, with increases of 25 basis points in September and December.

This change follows comments made by Fed Chair Kevin Warsh at the Jackson Hole symposium, where he expressed concerns about inflation remaining elevated. Warsh noted that financial conditions were not sufficiently restrictive and labor-market conditions were consistent with full employment.

Markets have also increased expectations of a rate hike in September, with the CME Group's FedWatch tool pricing in a 60.4% probability. Interest-rate futures reflect stronger expectations for near-term borrowing costs increases.