Barclays Sees No Recession, Fewer Fed Cuts After Trade Truce

Barclays strategists have overhauled their U.S. economic outlook following the weekend's U.S.-China tariff de-escalation, now expecting no recession in 2025, softer inflation, and just one Fed rate cut this year.

Trade Deal Eases Inflationary Pressures

In a Tuesday client note, Barclays highlighted that reciprocal tariffs will fall from 155% to about 40% on Chinese goods and by similar magnitudes on U.S. exports—levels they expect to hold “throughout the medium term.”

“We expect a less significant jump in inflation and no recession,” the bank wrote, citing the relief to input costs and global supply chains.

Revised Fed & Inflation Forecasts

• Fed rate cuts: Now forecasting one 25 bp cut in December 2025 (down from two cuts previously).

• Core PCE inflation: 2025 forecast lowered to 3.3% from 3.8%.

• GDP growth: Raised to 0.5% in 2025 (no longer penciling in a mild H2 downturn) and 1.5% in 2026 (Q4/Q4).

• Unemployment: Peak rate of 4.3%, with payrolls slowing but avoiding outright job losses.

Looking further ahead, Barclays expects three additional 25 bp cuts in 2026—in March, June, and September—bringing the funds rate to 3.25%-3.50% by year's end.

What Investors Should Watch Next

Key macro releases will test Barclays' upgraded forecasts:

• Personal Consumption Expenditures (PCE) inflation

• GDP revisions

• Labor market reports

You can track the timing and consensus estimates for these critical data points via the Economics Calendar API, ensuring you stay aligned with the Fed's evolving outlook.