Nomura Ups Fed Hike Forecast Amid Ongoing Inflation Concerns

Nomura, a Japanese investment bank, has revised its forecast for Federal Reserve interest-rate hikes due to elevated oil prices and sticky inflation. According to a report led by Nomura economist Aichi Amemiya, the Fed is expected to hike rates this week and in December, followed by an extended hold through 2027.

This decision was prompted by 'little inflation progress' and a sharp rise in energy prices, leading to increased market expectations. Despite this, Nomura still expects fewer rate hikes than what the market is pricing. The bank added forecasts for two more hikes for the European Central Bank in December and March, citing the Iran conflict as a headwind for H2 2026.

Nomura's dovish outlook is attributed to several factors, including resuming hiking cycles, negative effects of cost-push inflation on growth, and rising bond yields tightening financial conditions. This has limited space for further fiscal stimulus, according to the bank.