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Investing.com -- Barclays analysts revised their economic outlook, lowering U.S. GDP growth estimates for 2025 while increasing inflation projections due to “higher tariffs and a surge in trade policy uncertainty.” 

As a result, the firm now expects the Federal Reserve to cut interest rates twice this year.

“We now think the FOMC will cut rates 25bp twice this year, in June and September,” Barclays (LON:BARC) said in a note. 

The firm had previously expected only one rate cut in June but added another due to “the softer labor market,” despite a higher inflation outlook.

According to Barclays, “President Trump has shown more appetite to impose widespread tariffs than we had previously anticipated.” 

In response, analysts have raised their “baseline assumption of the trade-weighted tariff rate from about 10% to 15%.”

This shift has led Barclays to reduce its “GDP growth projection to 0.7% Q4/Q4 (-0.8pp) in 2025” and raise its “unemployment rate projection to 4.2% in Q4 (+0.4pp).” 

At the same time, the bank says inflation expectations have increased, with core PCE inflation now projected at “3.2% Q4/Q4 in 2025 (+40bp).”

Looking ahead, Barclays forecasts additional rate cuts in 2026, expecting the Fed to reduce rates by “25bp three times, in March, June and September.”

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