Nomura joins global brokerages in forecasting Fed rate cut this week

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Dec 8 (Reuters) – Nomura expects the U.S. Federal Reserve will deliver an interest rate cut at this week’s policy meeting, joining global peers in reversing their earlier expectations of the central bank holding rates amid dovish signals.

The Japanese brokerage expects a 25-basis-point cut in the last policy meeting of the year.

The change in call comes after dovish remarks from Fed officials, including New York Fed President and FOMC Vice Chair John Williams, and San Francisco Fed President Mary Daly that have strengthened bets for a December cut.

“…there have been enough dovish signals for Fed centrists to justify an additional “risk-management cut,” Nomura strategists said in a note dated December 5.

Yet, Nomura said, “the December decision remains a close call,” echoing a similar view from top brokerages.

“We expect four hawkish dissents against a decision to cut rates. We also expect a dovish dissent from Governor Miran in favor of a 50bp cut.”

Global brokerages, including J.P. Morgan and Morgan Stanley, have recently reversed their calls ahead of the policy meeting. They now expect the central bank to reduce borrowing costs as opposed to their prior forecast of a hold.

The change in calls also comes following softer U.S. economic data in November.

In 2026, Nomura continues to expect the Fed to cut rates by 25 bps each in June and September under a new Fed chair.

Expectations are that White House economic adviser Kevin Hassett could replace Fed Chair Jerome Powell next May. Hassett is seen to likely favor aggressive interest rate cuts.

Morgan Stanley and J.P. Morgan expect the bank to reduce borrowing costs in January again.

Traders are currently pricing in a 87.2% chance of a quarter-point interest rate cut at the monetary policy meeting on December 9-10, as per the CME FedWatch Tool.

(Reporting by Kanchana Chakravarty in Bengaluru; editing by Harikrishnan Nair)