Nomura Warns of Potential Fed Policy Disputes and Market Volatility

According to BlockBeats, Nomura Securities has issued a warning regarding potential policy disputes within the Federal Reserve following the appointment of a new chair in May next year. The firm anticipates that the new chair will lead an interest rate cut in June. However, as the U.S. economy shows signs of recovery, there may be significant opposition within the Fed to further rate cuts. This internal disagreement could undermine market confidence in the new chair and potentially lead to tensions between the Federal Reserve and U.S. President Donald Trump's administration. If the Fed decides to maintain interest rates after the June meeting, it could clash with Trump's push for additional rate cuts to boost midterm election prospects. Nomura predicts that uncertainty will peak between July and November next year, potentially triggering a "flight from U.S. assets." This could result in declining U.S. Treasury yields, a stock market correction, and a weakening dollar. Investors are advised to be cautious of potential liquidity reversals during this period. Additionally, major global economies might halt rate cuts or even begin raising rates, diminishing the relative appeal of dollar-denominated assets. The combination of policy deadlock, bottoming inflation, and signals of the Fed ending its rate-cutting cycle could exacerbate market volatility.