Fed rate cuts 2026: Nomura sees none as inflation stays sticky

Nomura said on Thursday it no longer expects the Federal Reserve to cut interest rates in 2026, dropping a forecast for two 25-basis-point reductions and reinforcing a harsher message for rates markets: the debate has shifted from how quickly easing resumes to whether the US central bank spends another full year parked at 3.50%-3.75%.

For investors, the revision matters because it converts a slow drift in market thinking into a named-bank call. Nomura had previously looked for cuts in September and December. Now it is arguing that sticky price pressure and a run of firmer official commentary make even that modest easing path hard to defend. Inflation is still high enough, and the labour market still sturdy enough, to keep policy restrictive without looking overtly punitive.

Committee politics, not just chair preference, sit at the centre of the new forecast. In Nomura’s reading, even Kevin Warsh, the incoming chair, would struggle to assemble a majority on the Federal Open Market Committee for a dovish turn if inflation stops improving and labour data stay respectable. The forecast change reads as more than a comment on Warsh. It is a comment on the voting bloc he inherits.

Nomura put the point plainly in comments carried by Reuters:

“recent data and Fedspeak make us skeptical that he will be able to convince a majority of the FOMC to go along with rate cuts”
— Nomura, via Reuters

April’s inflation backdrop helps explain why the political narrative around Warsh is becoming clearer. Semafor argued that Warsh has cover to hold rates steady because consumer prices ran at 3.8 per cent on the headline measure and 2.8 per cent on core, figures that do not describe a central bank under pressure to rush into relief. The Hill’s reporting on the obstacles facing the new chair makes the same institutional point differently: he arrives with a White House that wants lower rates, but he also arrives at a moment when maintaining Fed credibility may require resisting precisely that pressure. A chair can set tone and shape communication. He cannot erase inflation data or conjure a majority.

Why the market is moving

Analysts are reacting first because the economics keep narrowing the case for cuts. The latest Reuters poll of economists found 56 of 103 respondents expecting the Fed to hold steady through September, with the first cut pushed toward the back end of 2026. That is not yet a consensus for no cuts at all. It is, however, a clear retreat from the view that lower rates were simply delayed rather than fundamentally in doubt.

Skeptics also have more to work with than they did a month ago because the case no longer relies only on energy noise or geopolitical scare headlines. Reuters’ own inflation-expectations column framed the problem as a warning signal that may not fade quickly if households and businesses start to treat repeated shocks as normal. That possibility matters more than any single monthly print. A central bank can live with an upside surprise; it has a harder time cutting when the public starts to price in a longer era of unstable costs.

Scott Anderson of BMO captured that regime-risk concern in the same Reuters poll coverage:

“There is a big risk we’re in this new kind of era where you’re going to see more frequent shocks”
— Scott Anderson, BMO, via Reuters

Another market question is how many more banks need to drop their cut calls before traders treat no easing as the base case. Probably not many if the macro inputs keep lining up this way. A handful of large forecasters revising in the same direction can move rate expectations faster than the Fed’s own quarterly projections, because markets care less about the median dot in isolation than about whether private-sector analysts think the data are making those dots obsolete.

Labour data do just as much work here. In Reuters’ latest report on weekly claims, initial jobless claims fell to 209,000 while continuing claims stood at 1.782 million. Those are not recessionary numbers. Matthew Martin of Oxford Economics said the labour market was showing enough stability for the Fed to stay comfortable with a steady stance. That does not mean the economy is booming. It means the argument for insurance cuts remains thin while inflation is still misbehaving.

As Martin told Reuters:

“the labor market is showing enough stability to allow the Fed to feel comfortable keeping policy steady”
— Matthew Martin, Oxford Economics, via Reuters

What would reopen the door to cuts

Cuts still have a case, because policy works with lags and a central bank can wait too long. Rates at 3.50%-3.75% are restrictive, credit is not free, housing is still subdued and political pressure around borrowing costs is not going away. Yet none of those conditions automatically justify easing if the inflation trend stalls. The Fed’s problem in 2026 is not simply growth management. It is growth management under the threat that cutting too early could validate higher inflation expectations.

Inside Warsh’s first year sits the real regulator-policy tension. He may face demands from the White House for visible relief, but the committee he leads still has to defend the institution’s inflation-fighting credibility. If the next few months bring softer hiring, weaker spending and cleaner core inflation, the opening for a late-2026 cut can reappear quickly. The data most likely to reopen that door are a visible cooling in payrolls, higher continuing claims and a cleaner run of core inflation prints. If the next few months instead bring another stretch of resilient employment and sticky prices, the Fed does not need a dramatic hawkish turn to keep rates unchanged. It only needs enough evidence that patience is safer than haste.

Nomura’s call lands as a markets story rather than just a forecaster note. The longer the Fed stays still, the more every asset priced off expected easing has to be reconsidered. Treasury yields do not need a rate hike to move higher; they need fewer believable cuts. Equity valuations that were comfortable assuming cheaper money later in the year also have to absorb a longer period of tight financial conditions. The repricing can happen well before the central bank changes anything.

Earlier in May, Semafor’s analysis argued that Warsh was walking into office with more cover than expected to do nothing. That looked like a political framing then. After Nomura’s shift, it looks more like a trading one. The clean story for markets is no longer that a new chair creates a cleaner path to cuts. It is that a new chair may inherit a committee and an inflation backdrop that make standing still the least risky option.

No forecast is final. Growth can buckle, inflation can break lower and the case for easing can recover. But the burden of proof has plainly moved. To make a convincing case for cuts, doves now need softer numbers, not just patience. Until that happens, each fresh forecast revision toward no easing does less to surprise markets and more to ratify what the data are already saying: the higher-for-longer trade is no longer a tail risk. It is edging toward the middle of the road.