Barclays analysts warn that a shift toward more restrictive monetary policy among major central banks could reduce liquidity support for global equity markets. The European Central Bank raised interest rates for the first time since 2023, while the Bank of Japan lifted borrowing costs to their highest level since 1995, both citing inflation risks from energy market disruptions. The U.S. Federal Reserve held rates steady but nine officials now project at least one increase this year, and the first policy statement under Chair Kevin Warsh emphasized price stability without mentioning maximum employment. Barclays strategist Emmanuel Cau said the tailwind from monetary easing is behind us and that a more aggressive tightening cycle, especially from the Fed, could squeeze liquidity and weaken a key pillar of bullish equity returns. The bank also noted that an interim U.S.-Iran peace agreement has eased some inflation concerns, and it sees a potentially better macro outlook supporting European equities in the second half of the year.
Barclays PLCBarclays warns hawkish central banks could reduce liquidity support for equities, challenging market momentum