Nomura Investment Bank released a note on Friday morning indicating that, according to their analysis, the Federal Reserve of the United States is poised to reduce interest rates by a significant 100 basis points in the year 2024.
Additionally, Nomura predicts a slowdown in the reduction of the balance sheet in June, followed by the conclusion of quantitative tightening in December. The key question remains: will the upcoming Friday report (26.01.2024) on Personal Consumption Expenditures (PCE) reveal a 3-month and 6-month annualized core PCE pace below the Fed's targeted 2.0%?
Turning to the latest report from the major investment institution, Nomura Holdings Inc. disclosed on Friday its expectation that the Federal Reserve of the United States will undertake substantial interest rate cuts, potentially reaching up to 100 basis points in the year 2024.
In terms of the timeline, estimates propose that the initiation of monetary policy easing is likely to commence in May, followed by successive adjustments in July, September, and December. Nomura's analysis envisions the Fed lowering interest rates by a quarter of a percentage point in each of these months.
Notably, analysts at Nomura anticipate that the report on Personal Consumption Expenditures (PCE) in the USA, scheduled for release today, will demonstrate that the 3-month and 6-month annualized pace of core PCE falls below the Fed's targeted 2%.
However, it's important to note that Nomura is not the sole institution advocating for this perspective. Analysts at Bank of America are similarly forecasting a 100-basis-point reduction in the funds rate by the U.S. Federal Reserve in the year 2024.
Expanding on the Bank of America's insights, their report underscores the expectation of a gentle landing for the U.S. economy and a sustained period of economic expansion. This optimistic outlook is attributed to the resilience observed in the labor market.
Nevertheless, the report from Bank of America acknowledges the presence of "several threats," encompassing both geopolitical and fiscal dimensions. These potential challenges include conflicts in the Middle East, the Russo-Ukrainian war, upcoming national elections in various countries (including the USA in 2024), and the concerning high level of indebtedness in the U.S. government.
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