Barclays (BCS) has good news for investors who want more interest rate cuts in 2025. The financial firm updated its interest rate predictions to include two quarter-point rate cuts this year. The bank expects these rate cuts in June and September. Before this update, it only expected a single interest rate reduction in June.
If Barclays’ prediction comes to fruition, it would be welcome news for the stock market. Interest rates have remained high for years now after the Federal Reserve started increasing them in March 2022 to combat rising inflation. While the central bank started dropping interest rates late last year, it put further cuts on hold as sticky inflation remained above its 2% target.
Why Does Barclays Believe More Interest Rate Cuts Are Coming?
According to the brokerage firm, a softer job market will lead to additional interest rate cuts in 2025. Analysts at the company said lower job growth and increasing unemployment will force the Fed’s hand despite inflation remaining above desired levels.
Barclays expects that the September rate cut to be the last one investors see this year. The firm doesn’t expect the Fed to resume rate cuts again until sometime in 2026.
What This Means for the Stock Market
Investors aren’t a fan of high interest rates as they stifle stock growth. That’s due to companies taking more cautious approaches to business as economic failures are more severe when interest rates are high. Add in a mix of resilient inflation and a trade war, and it makes sense that investor fear remains high.
At times like these, traders may consider low-volatility investments, such as gold or government bonds. A third option is sticking with the stock market but only holding less volatile shares. A few examples include Gilead (GILD), Kellanova (K), and TXNM Energy (TXNM). GILD has the best consensus rating at Strong Buy, while TXNM offers the highest upside potential at 5.22%.
See more low-volatility stock comparisons
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