Nomura: June FOMC to Remove Easing Bias
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Nomura expects the June FOMC meeting to deliver a fourth consecutive pause, maintaining the current policy rate range while systematically removing the central bank's easing bias from its official statement. The report anticipates a unanimous vote, reinforcing the shift toward a more cautious policy stance. While the labor market's downside risks have clearly diminished — with three-month average nonfarm payrolls reaching 188,000 and unemployment stable around 4.3% to 4.4% — inflation remains the primary constraint. Nomura projects May core PCE inflation will rebound to 0.345% month-over-month and 3.426% year-over-year, the highest reading since October 2023. Regarding the Summary of Economic Projections, Nomura forecasts that the 2026 and 2027 median federal funds rate dots will remain unchanged, showing no rate cuts, while the 2028 dot will reflect only a single 25-basis-point reduction. The long-run rate estimate may be modestly revised higher. The Fed Chair's press conference will be critical; he is expected to acknowledge the stickiness of inflation and energy risks while potentially citing AI-driven productivity gains as a medium-term argument for future easing. Ultimately, the June meeting should pull markets away from the rate-cut narrative and back toward an inflation-constrained reality.
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