The US Federal Reserve is no longer expected to cut interest rates at its policy meeting next month, Nomura Holdings Inc said, making it the first global brokerage to signal a pause in the US central bank’s rate-cutting cycle in the wake of Donald Trump’s election win.
Nomura now expects the Fed to deliver only two 25-basis-point rate reductions at its March and June meetings next year, leaving the brokerage’s Fed funds rate projection unchanged at 4.125 percent throughout the year.
The Fed’s benchmark overnight interest rate is currently in the 4.50 to 4.75 percent range. It has cut rates by 75 basis points this year.
Photo: Reuters
Other global brokerages, including Goldman Sachs Group Inc and JPMorgan Chase & Co, anticipate a 25-basis-point cut from the US central bank next month.
INFLATION RISKS
Nomura expects the Fed to halt its tightening cycle next month after recent hawkish remarks from policymakers amid ongoing economic growth and the likelihood of further elevated inflation, adding to the central bank’s indication that it is not in a hurry to lower rates.
This follows the Fed’s increasing hesitancy to cut rates as a major political shift is under way after Trump’s presidential victory.
Wall Street is trying to reconcile what it sees as further inflationary pressures in the coming year as the US president-elect pushes for tax cuts, higher tariffs and a crackdown on immigration.
“We currently expect tariffs will drive realized inflation higher by the summer, and risks are skewed towards an earlier and more prolonged pause,” Nomura said in a note on Friday.
Traders now see a 34.7 percent chance of the central bank pausing rate cuts next month, according to CME Group Inc’s FedWatch Tool.
FRAGMENTATION
Separately, European Central Bank Governing Council member Joachim Nagel sees the threat of a further fragmentation of the global economy, which could present central banks with new challenges in the form of higher or more volatile inflation.
“The first signs of geoeconomic fragmentation are becoming increasingly evident — and unfortunately, we may be on the brink of significant escalation,” the German central bank chief said yesterday in Tokyo. “This is a concerning development, and we should all strive to restore cooperation and free trade.”
If international tensions should intensify, this could lead to greater inflationary pressures or increased volatility in consumer-price growth and central banks might have to react with higher interest rates, Nagel said.
“We can and will do what is necessary to maintain price stability,” he said.
The Bundesbank president has repeatedly warned the re-election of Trump augurs a protectionist era and threatens to fragment the global economic order.
The Republican has, among others, pledged to impose 60 percent tariffs on China and as much as 20 percent on everyone else, raising fears of full-blown trade wars.
Additional reporting by Bloomberg
SEEKING CLARITY: Washington should not adopt measures that create uncertainties for ‘existing semiconductor investments,’ TSMC said referring to its US$165 billion in the US Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) told the US that any future tariffs on Taiwanese semiconductors could reduce demand for chips and derail its pledge to increase its investment in Arizona. “New import restrictions could jeopardize current US leadership in the competitive technology industry and create uncertainties for many committed semiconductor capital projects in the US, including TSMC Arizona’s significant investment plan in Phoenix,” the chipmaker wrote in a letter to the US Department of Commerce. TSMC issued the warning in response to a solicitation for comments by the department on a possible tariff on semiconductor imports by US President Donald Trump’s
The government has launched a three-pronged strategy to attract local and international talent, aiming to position Taiwan as a new global hub following Nvidia Corp’s announcement that it has chosen Taipei as the site of its Taiwan headquarters. Nvidia cofounder and CEO Jensen Huang (黃仁勳) on Monday last week announced during his keynote speech at the Computex trade show in Taipei that the Nvidia Constellation, the company’s planned Taiwan headquarters, would be located in the Beitou-Shilin Technology Park (北投士林科技園區) in Taipei. Huang’s decision to establish a base in Taiwan is “primarily due to Taiwan’s talent pool and its strength in the semiconductor
An earnings report from semiconductor giant and artificial intelligence (AI) bellwether Nvidia Corp takes center stage for Wall Street this week, as stocks hit a speed bump of worries over US federal deficits driving up Treasury yields. US equities pulled back last week after a torrid rally, as investors turned their attention to tax and spending legislation poised to swell the US government’s US$36 trillion in debt. Long-dated US Treasury yields rose amid the fiscal worries, with the 30-year yield topping 5 percent and hitting its highest level since late 2023. Stocks were dealt another blow on Friday when US President Donald
UNCERTAINTY: Investors remain worried that trade negotiations with Washington could go poorly, given Trump’s inconsistency on tariffs in his second term, experts said The consumer confidence index this month fell for a ninth consecutive month to its lowest level in 13 months, as global trade uncertainties and tariff risks cloud Taiwan’s economic outlook, a survey released yesterday by National Central University found. The biggest decline came from the timing for stock investments, which plunged 11.82 points to 26.82, underscoring bleak investor confidence, it said. “Although the TAIEX reclaimed the 21,000-point mark after the US and China agreed to bury the hatchet for 90 days, investors remain worried that the situation would turn sour later,” said Dachrahn Wu (吳大任), director of the university’s Research Center for
RSS