Nomura Securities: The Fed will not cut rates this year.

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After the Federal Reserve's hawkish rate cut, Powell bluntly stated that another rate cut in December is "far from certain." Nomura Securities updated its outlook on Federal Reserve policy, arguing that after the rate cut on Wednesday, the Federal Open Market Committee (FOMC) has ended its easing actions for the year and will not cut rates again in December.

Nomura Securities said in a report on Wednesday evening: "The data in the coming months may be slightly dovish, but we doubt whether the extent of this weakness is enough to reignite the FOMC's concerns about deterioration in the labor market."

As Wallstreetcn mentioned earlier,

At the post-meeting press conference, Powell explicitly refuted the view that a December rate cut is "a done deal," bluntly stating that this prospect is "far from certain," instantly reversing the market's optimistic sentiment.

The probability of a December rate cut priced in by the market plummeted from 95% to 65%. The Dow Jones Industrial Average and the S&P 500 both erased intraday gains and turned lower. The yield on the 2-year U.S. Treasury note, which is the most sensitive to interest rate prospects, surged by 0.092 percentage points, the largest single-day gain since early July.

Against this backdrop, Nomura updated its forecast. The Japanese brokerage now expects the Federal Reserve to keep rates unchanged at the December policy meeting. Previously, Nomura expected the Fed to cut rates by an additional 25 basis points by the end of the year.

The Rate Cut Cycle Is Not Over, Three Rate Cuts Projected for 2026

After the latest policy meeting, Chair Powell's remarks became the key to shifting market expectations. He said that internal policy disagreements within the committee and insufficient federal data may hinder further rate cuts this year.

In his remarks, Powell weighed two risks: on one hand, the downside risk faced by the job market; on the other, the danger of acting when the economic outlook is unclear. This cautious stance has been interpreted by Nomura and other institutions as the Fed entering a period of policy observation, rather than taking immediate follow-up action.

Powell's tough stance marks a deepening of Fed concerns about further policy easing. Wallstreetcn previously mentioned that, according to Wall Street Journal reporter Nick Timiraos, Powell's remarks made it clear that as "more and more officials" questioned the need for further rate cuts, the easiest part of this easing cycle may be over.

This adjustment in Nomura's expectations reflects the market's reassessment of the Fed's policy path. At Wednesday's meeting, the Fed explicitly made "easing further labor market weakness" the main basis for any rate cuts, highlighting that the performance of the labor market remains the core focus of current monetary policy.

Although the short-term outlook has turned cautious, Nomura maintains its view on the Fed's long-term easing stance. The institution's analysts expect that the Fed's rate-cutting cycle is not over, but its pace will be much slower and more spread out.

According to its latest forecast, Nomura expects the Fed to cut rates three times in 2026, with each cut being 25 basis points, specifically in March, June, and September of that year. This ultra-long-term forecast shows that the market is shifting its focus from short-term policy fluctuations to a much longer macroeconomic and interest rate cycle.

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