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
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his
ADVERSARIES: The new list includes 11 entities in China and one in Taiwan, which is a local branch of Chinese cloud computing firm Inspur Group The US added dozens of entities to a trade blacklist on Tuesday, the US Department of Commerce said, in part to disrupt Beijing’s artificial intelligence (AI) and advanced computing capabilities. The action affects 80 entities from countries including China, the United Arab Emirates and Iran, with the commerce department citing their “activities contrary to US national security and foreign policy.” Those added to the “entity list” are restricted from obtaining US items and technologies without government authorization. “We will not allow adversaries to exploit American technology to bolster their own militaries and threaten American lives,” US Secretary of Commerce Howard Lutnick said. The entities
Minister of Finance Chuang Tsui-yun (莊翠雲) yesterday told lawmakers that she “would not speculate,” but a “response plan” has been prepared in case Taiwan is targeted by US President Donald Trump’s reciprocal tariffs, which are to be announced on Wednesday next week. The Trump administration, including US Secretary of the Treasury Scott Bessent, has said that much of the proposed reciprocal tariffs would focus on the 15 countries that have the highest trade surpluses with the US. Bessent has referred to those countries as the “dirty 15,” but has not named them. Last year, Taiwan’s US$73.9 billion trade surplus with the US
Prices of gasoline and diesel products at domestic gas stations are to fall NT$0.2 and NT$0.1 per liter respectively this week, even though international crude oil prices rose last week, CPC Corp, Taiwan (台灣中油) and Formosa Petrochemical Corp (台塑石化) said yesterday. International crude oil prices continued rising last week, as the US Energy Information Administration reported a larger-than-expected drop in US commercial crude oil inventories, CPC said in a statement. Based on the company’s floating oil price formula, the cost of crude oil rose 2.38 percent last week from a week earlier, it said. News that US President Donald Trump plans a “secondary