Nomura has revised its outlook, now projecting that the Federal Reserve will shave off 25 basis points at both its October and December meetings, a shift from its earlier call for a pause in October followed by easing in December. The change comes after the Fed recently cut rates by a quarter point and signaled a softer stance ahead in view of rising labor market stress and economic headwinds.
While this move is viewed as dovish, Fed projections still retain surprisingly hawkish elements. Inflation is forecasted to close 2025 at around 3%, well above the central bank’s 2% target. At the same time, unemployment is expected to stay at 4.5%, with growth creeping up slightly to 1.6% from earlier forecasts of about 1.4%.
Looking into 2026, Nomura’s analysts anticipate quarter-point rate cuts in March, June, and September, reflecting a dimming priority on inflation risks and possible changes in leadership at the central bank. Their assessment suggests the Fed is increasingly willing to respond to data indicating economic softness.
Other major institutions such as Goldman Sachs and Citigroup are largely aligned with this outlook, expecting rate cuts in the final meetings of 2025. Some, including Bank of America, warn that risks are rising for an even earlier cut, depending on how fast labor data deteriorates.
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