Nomura: US Economics Weekly — Fed Holds Rates, but Easing Bias Persists

Nomura analyzes the March FOMC meeting, where the Federal Reserve kept rates unchanged with a single dovish dissent from Governor Miran. Although economic projections were revised upward, the median dot plot still signals one rate cut in 2026. Fed Chair Powell indicated he may remain on the Board after his term ends, potentially delaying the restart of easing. Consequently, Nomura sees rising risks of delayed policy easing.

February PPI data came largely in line with expectations, prompting Nomura to slightly lower its core PCE inflation forecast to 0.376% month-over-month, or 3.0% year-over-year. Meanwhile, the escalating Iran conflict has disrupted energy infrastructure and pushed oil prices higher. However, Nomura argues the US economy remains relatively insulated from energy shocks, noting that energy goods comprise only 2% of consumer spending and domestic natural gas supplies are abundant.

Following softer PPI data, weak wholesale inventories, and an unexpected drop in new home sales, Nomura lowered its Q1 GDP tracking estimate from 3.2% to 2.5%. Despite these headwinds, the FOMC outcome leaned dovish. Nomura maintains its baseline forecast for two rate cuts in 2026, expected in June and September, resulting in a terminal rate of 3.00-3.25%, assuming Warsh assumes the chairmanship.