Nomura Expects No Interest Rate Cuts from the Fed for the Remainder of the Year

Nomura stated that no interest rate cuts are expected from the Federal Reserve during its policy meeting in December and described itself as the first global institution signaling a pause in the rate-cutting cycle following Trump's election victory.

Nomura now expects the Fed to implement only two 25 basis point interest rate cuts during its March and June meetings in 2025, leaving its projection for the Fed funds rate unchanged at 4.125% until next year. The Fed's benchmark overnight interest rate currently hovers between 4.50% and 4.75%. The Fed has reduced interest rates by 75 basis points in 2024.

Other global institutions, including Goldman Sachs and JP Morgan, expect a 25 basis point cut from the central bank next month.

In light of ongoing economic growth and the possibility of further inflation, Nomura anticipates that recent hawkish comments from policymakers will lead the Fed to pause its tightening cycle next month and demonstrate that the central bank is not in a hurry to lower rates.

This situation follows the Fed's growing hesitation to cut rates amid significant political changes following Trump's presidential victory. In a note released on Friday, Nomura said, "We anticipate that tariff-induced inflation will rise until summer, and the risks are skewed towards an earlier and longer-lasting pause."