Dovish outlier Nomura boosted Fed-hike forecasts for two reasons
Elevated oil prices and sticky inflation have prompted Nomura to add more rate hikes to its monetary forecasts, though less than what the market is pricing.
TL;DR
- Nomura now forecasts more Federal Reserve rate hikes due to oil prices and sticky inflation.
- Despite the revision, Nomura expects fewer hikes than the market is currently pricing.
- The bank also added forecasts for two more European Central Bank hikes and predicts inflation above target until early 2027.
- Nomura's outlook for the Bank of Japan, Bank of England, and People's Bank of China differs from market expectations.
- Reasons for Nomura's dovish outlook include near-neutral policy rates, negative growth impacts of cost-push inflation, and tightening financial conditions from rising bond yields.
- Investor concerns about inflation have grown, with a majority now expecting at least two Fed rate hikes in the next year, a shift from previous expectations.