Nomura expects Fed to keep rates unchanged in December meeting

[Seal of the United States Federal Reserve Board]
LD

Nomura said it now expects the Federal Reserve to keep rates steady in its next meeting in December, after the Fed slashed interest rates on Wednesday.

The Fed reduced its benchmark [https://seekingalpha.com/news/4510518-federal-reserve-cuts-by-another-25-basis-points] interest rate by 25 basis points to 3.75%-4.00% on Wednesday, its second straight cut, as it seeks to ease off the brakes in an effort to protect the labor market.

"Data are likely to be modestly dovish in the months ahead, but we doubt the weakness will be sufficient to rekindle FOMC concerns of a deteriorating labor market. We continue to expect three rate cuts in 2026," analysts led by Jeremy Schwartz said.

Nomura's expectations come after Fed Chair Jerome Powell said a December rate cut is not a foregone conclusion.

"A further reduction in the policy rate at the December rate is not a foregone conclusion. Far from it," Powell had said in his post-meeting press conference [https://seekingalpha.com/news/4510526-another-rate-cut-in-december-is-not-a-foregone-conclusion-powell-says-at-press-conference] on Wednesday.

Beyond just reclaiming optionality, Powell implied that a December pause was increasingly the default outcome, Schwartz said.

Schwartz also called Powell's press conference "surprisingly hawkish" as the Fed Chair aggressively pushed back against market pricing for a December rate.

Traders were pricing in a 68.8% chance of another quarter-point rate cut in December, according to CME's FedWatch tool [https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html].

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