Analysts have moved their forecast for the first rate cut from June to September 2026, citing a combination of geopolitical instability and changes in the central bank's leadership. The company now expects only two cuts this year, with the second coming in December.

Geopolitical Tensions and the "Warsh Delay"

The main catalyst for this tightening was the ongoing conflict in Iran, which has injected new inflationary pressure into the US economy. As energy prices remain volatile and supply chains face regional disruptions, Nomura believes short-term price stability has become a more pressing concern for the Federal Open Market Committee (FOMC).

A shift in the political calendar is exacerbating current economic factors. The delay in confirming Chairman Kevin Warsh has reduced immediate political pressure for a mid-year rate cut.

Nomura notes that while the new leadership is expected to ultimately prioritize easing, the current vacuum and the inflation spike due to the Iran War provide the Fed with a clear rationale for maintaining a tight stance during the summer months.

Asymmetric Response to Labor Market Weakening

Despite the delay, Nomura believes the Fed's underlying stance remains accommodative. FOMC officials, including current Chairman Jerome Powell, have demonstrated an "asymmetric response" to economic data, showing greater sensitivity to signs of labor market weakness than to temporary price hikes.

Analysts believe the current inflationary pressure emanating from the Middle East is likely to be temporary. Once the leadership transition is complete and the labor market shows further signs of cooling, the path to a rate cut in September will be clear. During the second quarter of 2026, investors should brace for a "higher and longer" scenario as the central bank navigates the twin hurdles of war-induced inflation and internal administrative transitions.