Nomura predicts a July Fed rate drop like Goldman and JPMorgan, and he anticipates a surge in rate decreases globally

The analysts at the firm also noted that other central banks would find it simpler to adopt similar policies if the rate-cutting cycle picked up, and that this would be especially important for emerging markets (EM).

Rate cuts from the European Central Bank (ECB), Swiss National Bank (SNB), Bank of Canada (BoC), People's Bank of China (PBC/PBoC), and Bank of Thailand (BOT) are anticipated by Nomura by the end of June.

Based on Nomura's most recent Economic Insights report, the US Federal Reserve is expected to lower rates in July and again in December as part of a worldwide rate-cutting cycle that is heating up.

It was said that an acceleration of the rate-cutting cycle would facilitate the adoption of similar policies by other central banks, with developing markets being especially affected.

Financial behemoths like JPMorgan and Goldman Sachs anticipate an early rate decrease, while Nomura joins them in anticipating the Fed's first rate cut in December. These banks include Bank of America, Morgan Stanley, and UBS Wealth Management. Nomura's forecast coincides with remarks made by Fed Chair Jerome Powell, who said that although he still expects inflation to decline, he is not as certain as he once was.

Rob Subbaraman and Yiru Chen of Nomura said that their belief in a July rate drop is growing as a result of the US core CPI falling in April and growing indicators that the nation's economy is slowing down.

They said that what is "less appreciated" is that a global cycle of rate-cutting is already well under way and that other central banks are in a unique position to decouple from the Fed since their own economies are already experiencing very favorable circumstances.

Subbaraman and Chen said that they anticipate rate decreases from the European Central Bank, Swiss National Bank, Bank of Canada, People's Bank of China, and Bank of Thailand by the end of June in light of this as well as the US economic statistics.

"As the global rate-cutting cycle revs up, an international comparison of core CPI inflation, the Sahm Rule indicator of recession risk along with the real policy rate... highlight how some central banks have gone slower than others in starting rate cuts (of course, there are various other factors to consider, such as fiscal position Report Phrase and financial stability risks)," they stated.

The Sahm Rule, developed by Fed economist Claudia Sahm, uses a three-month moving average of the US unemployment rate to predict when a recession will begin. The criterion states that the recession is either already underway or is imminent if the average increase exceeds the low of the preceding 12 months by 0.5 percent.

The figure provides the three primary metrics used by the study to evaluate the potential for policy rate reductions.

The Reserve Bank of New Zealand, the Bank of Canada, and the Reserve Bank of South Africa all seem ready to implement cuts based on all three indicators. As the global cycle of rate-cutting expands, Brazil and Mexico seem to have considerable room to reduce their still-high real rates "Subbaraman and Chen stated.