Nomura Securities predicts: Fed will pause rate cuts in December, only two cuts next year... Trump's inauguration brings uncertainty

The results of the U.S. presidential election are out, with Trump returning to the White House. Will it affect the Federal Reserve monetary policy and trigger market follow-up? According to the latest prediction by Nomura Securities analysts, the Fed will pause interest rate cuts at the December meeting, becoming the first major brokerage firm to suggest a pause in interest rate cuts since Trump's election victory. Since September, the Fed has cut interest rates by 3 points to between 4.50% and 4.75%. However, Nomura Securities now predicts that the Fed will pause interest rate cuts at the December meeting and only cut by 1 point in March and June 2025, keeping their interest rate forecast unchanged at 4.125% next year. Nomura Securities estimates no rate cut in December. In contrast, other global brokerages including Goldman Sachs and J.P. Morgan predict a 1-point rate cut by the Fed next month. Nomura Securities stated that with the U.S. economy continuing to grow and inflation potentially rising further, recent hawkish comments by Fed decision-makers indicate that the Fed is not in a hurry to cut rates. This suggests a possible pause in rate cuts next month. This hesitation by the Fed on rate cuts is also heightened by the impact of Trump's policies, including tax cuts, higher tariffs, and stricter immigration control, which are expected to raise inflation over the next year. Nomura Securities predicts that tariffs will push up inflation before next summer, leading the Fed to potentially pause rate cuts more quickly and for a longer period. After the rate cut in June 2025, U.S. rate cuts will enter a long pause period until March 2026. According to the FedWatch tool from the CME Group, the market currently expects a 41% chance of the Fed pausing rate cuts in December. Cathay United Bank estimates a 3-point rate cut before June next year. However, regarding whether the Fed's interest rate policy will change due to Trump, Cathay United Bank's chief economist Lin Qichao stated yesterday that since Trump will take office next year, his influence on the Fed's interest rate policy has not yet been felt. Assuming no change in the easing trend, the prediction is that the Fed will still cut rates by 1 point in December this year and by 1 point each in March and June next year. This means that by June next year, the U.S. is expected to have cut rates by a total of 3 points, bringing the federal interest rate down to 4%. As for the rate cut trend in the second half of next year, Lin Qichao stated that the Fed will continue to observe economic dynamics and the impact of Trump's tariff policies after taking office, which is currently unclear. Lin Qichao pointed out that the extent of rate cuts by the Fed in the coming years will be influenced by two main factors: the impact of Trump's tariff policies on industries and the labor force gap caused by immigration policies, further increasing the risk of inflation. The uncertainty of policies may lead to market fluctuations, and with Trump taking office in January next year, the impact of tariffs will involve a series of negotiation processes. The first half of the year will not have much impact on the financial markets, but the latter half will be more variable. Manager of Cathay American Multi-Income Balanced Fund, Fan Jiang Pei-Ying, stated that despite Powell's statement last week that he is not in a hurry to cut rates, according to Fed Watch data, the Fed is still expected to cut rates by another 2 points before the June 2025 interest rate meeting, continuing the rate cut cycle, which is still favorable for the performance of medium and long-term U.S. bonds. Fan Jiang Pei-Ying pointed out that the market may be overly concerned about the impact of Trump's policies on inflation, but the actual results will depend on the implementation of Trump's tariff policies after taking office. The U.S. also needs to consider the potential impact of these policies on growth, other macroeconomic data, fiscal policies, economic trends, etc., all of which will affect the future trend of U.S. interest rates. Mega Financial Holding Co., Ltd. warned: Trump's policies may lead to Fed rate hikes. Mega Financial Holding Co., Ltd. Chairman Dong Rui-bin warned that if Trump's policies are implemented, it could exacerbate inflation, leading to possible rate hikes in the U.S. The monetary policy may not start rate cuts as expected in December this year and may cut rates by 4 points next year. Dong Rui-bin mentioned that the main purpose of Trump's policies is to increase employment rates, including raising tariffs on countries such as China and Asia, reducing domestic personal and corporate income tax rates, with the main goal being to increase employment. Therefore, to prevent a red supply chain, TSMC should invest in the U.S. According to Dong Rui-bin, raising tariffs may cause import inflation. Therefore, Trump's proposal to exploit oil can offset some inflation, increase employment in the iron ticket area, and repatriate 11 million illegal migrant workers. In the future, to cope with the unemployment caused by rate hikes, vacant positions can be filled to prevent deterioration. Related reports: Powell stands firm: Trump will not force resignation, the election will not affect the Fed's interest rate decision...but will there be changes in rate cuts in December? J.P. Morgan warns: Trump's victory = inflation storm resurgence, Fed may pause rate cuts in December. 20 Central Bank announced the interest rate decision this week! Fed cuts rates during the U.S. election, will the market face a huge wave? Nomura Securities predicts: Fed will pause rate cuts in December, only cut 2 points next year...Trump's inauguration brings uncertainty. This article was first published on BlockTempo, the most influential blockchain news media in the Block area.