Nomura just ripped up its playbook on Federal Reserve rate cuts. The Japanese investment bank now expects the Fed to hold rates steady through all of 2026, abandoning its earlier forecast of two 25 basis point reductions in September and December of next year.

The numbers telling the story

In a research note dated May 21, Nomura pointed to a stubborn inflation picture that makes monetary easing look increasingly unlikely. The Consumer Price Index rose 3.8% year-over-year as of April 2026, marking the highest reading since May 2023.

Energy costs are doing most of the heavy lifting on the upside, surging 17.9% amid escalating tensions in the Middle East tied to the Iran conflict. A global memory chip shortage is piling on additional pressure, pushing consumer prices higher across categories that touch electronics and computing.

The Federal Reserve held its policy rate at 3.50%-3.75% following the FOMC meeting on April 28-29.

Why Nomura’s shift matters beyond Wall Street

Nomura joins a growing consensus of brokerages and financial institutions that have quietly shelved their rate-cut projections for 2026. Higher interest rates for longer mean tighter liquidity conditions across the board. When the cost of borrowing stays elevated, money tends to flow toward safer, yield-bearing instruments rather than speculative bets.

Treasury yields remain attractive at current rate levels, which creates a gravitational pull away from assets that don’t generate income. Bitcoin, Ethereum, and the broader crypto market fall squarely into that category. A prolonged period of higher rates also tends to strengthen the US dollar, which is historically a headwind for crypto prices, since most digital assets are denominated in dollars and become relatively more expensive for international buyers.

Markets had been pricing in some degree of easing for the back half of 2026. Nomura’s earlier forecast of September and December cuts reflected a genuine expectation that inflation would cool enough to give the Fed room to maneuver. That expectation is now evaporating.

What investors should actually watch

The Fed can’t drill for oil. It can’t build semiconductor fabs overnight. Middle East tensions and chip shortages are supply-side problems, and monetary policy is a demand-side tool. That means the pain of higher rates hits growth and employment without necessarily solving the price problem.

With CPI at 3.8% and energy costs surging nearly 18%, there is little reason to think the central bank will pivot toward accommodation anytime soon. Portfolio positioning that assumed cheaper borrowing costs were around the corner needs a serious second look.

The next major data points to watch are upcoming CPI releases and any forward guidance from FOMC communications.