Central Banks Recalibrating Monetary Policies

Nomura argues that global central banks are resuming rather than beginning hiking cycles, so policy rates will rise less than markets expect before an extended period of restraint.

• The Federal Reserve is expected to deliver one 25-basis-point hike in December, then hold through 2027, despite markets pricing three further increases; core PCE inflation remains above 3% year on year.
• Nomura expects the ECB to raise its deposit rate twice, in December 2026 and March 2027, to 3.00%, versus market expectations for two to three additional hikes.
• The BOJ is forecast to raise rates in December 2026 and March 2027 to 1.75% in the 60%-probability main scenario, while Japan’s core CPI is expected to accelerate through Q1 2027, decelerate from Q2, and stabilize near 2%.
• No further hikes are expected from the Bank of England or Bank of Canada, compared with market pricing of about four for each; Australia, India and Korea are also expected to deliver fewer hikes than consensus.
• In Asia, China is expected to keep policy rates and reserve-requirement ratios unchanged until Q2 next year, while Korea is forecast to hike twice to a 3.50% terminal rate and India twice in Q4 as food, oil and core inflation rise.

Takeaway: Investors should expect a less aggressive tightening path than market pricing implies, but persistent energy, food and technology-related inflation risks argue for continued caution, especially across Asian markets.