Tear Up the Report Immediately! Nomura No Longer Expects the Fed to Cut Rates in December

① Nomura Securities said that after the Fed announced a rate cut on Wednesday, the institution now expects the Fed to keep rates unchanged at the December policy meeting; ② Earlier this month, this Japanese brokerage had expected the Fed to cut rates by 25 basis points in October and December, respectively.

The Fed cut rates by 25 basis points on Wednesday as market expected, aiming to curb further weakness in the labor market. However, Fed Chairman Powell unexpectedly delivered a straightforward message to investors who believed the Fed was bound to implement a third rate cut this year in December: not so fast.

Powell specifically emphasized the divisions within the Federal Open Market Committee (FOMC) and downplayed the view that a rate cut in six weeks was a foregone conclusion. When discussing bets on a December rate cut, he stated at one point, "In fact, far from it."

Nomura economist David Seif said, "Not all labor market slowdowns are the same. As for the slowdown we are experiencing now, it's about as gentle as it gets. People aren't being laid off. What really causes consumer spending to decline is large-scale layoffs."

Regarding the interest rate outlook for next year, Nomura Securities expects the Fed to cut rates by 25 basis points each in March, June, and September 2026.

According to the CME Group's FedWatch Tool, interest rate traders now see about a 70% chance of a Fed rate cut in December, significantly lower than about 90% on Tuesday—this indicates that traders have received the signal from Fed Chairman Powell that a December rate cut is not a "done deal." However, they still believe the likelihood of a cut at that time is slightly greater than no cut.