Markets React as Barclays Forecasts Three Rate Cuts in 2025 After Jobs Report

The SPY ETF, a bellwether for the broader market, is 0.2% higher today, as economic forecasts shift, particularly those concerning Federal Reserve policy.

Following a weaker-than-expected jobs report, Barclays' chief U.S. economist, Marc Giannoni, revised the firm's interest rate cut projections. This adjustment reflects growing concerns about downside risks in the labor market, a sentiment echoed by Federal Reserve Chairman Powell. The jobs data seemingly reinforces the likelihood of monetary easing, leading Barclays to anticipate a more aggressive rate-cutting cycle.

Barclays now projects three 25-basis-point rate cuts in 2025, adding a third cut to its previous forecast and scheduling the initial cut for October. The firm further anticipates two additional cuts in 2026. The expectation of a rate cut at the Fed's September meeting is viewed by Barclays as highly probable.

While some Federal Open Market Committee (FOMC) members may advocate for a larger 50-basis-point cut in September, Barclays believes the majority will favor a more measured 25-basis-point reduction.

This latest projection marks a notable shift from Barclays' earlier forecasts when back in April, the firm adjusted its forecast to just one 25-basis-point rate cut in June, driven by unexpectedly strong economic data and firm inflation expectations.

The prospect of more frequent rate cuts could stimulate economic activity, potentially boosting corporate earnings and driving positive performance for the SPY.