Nomura, StanChart join top brokerages in forecasting Fed rate cut this week

By Kanchana Chakravarty and Siddarth S

Dec 8 (Reuters) - Most global brokerages expect the U.S. Federal Reserve to deliver an interest rate cut this week, with Nomura and Standard Chartered being the latest, reversing their earlier stand of the central bank holding rates amid dovish signals.

Both Nomura and StanChart expect a 25-basis-point cut in the Fed's last policy meeting for the year.

Top brokerages, including J.P. Morgan and Morgan Stanley, recently reversed their calls and they now expect the Fed to reduce borrowing costs as opposed to their prior forecast of a hold.

The change in calls comes broadly after softer November data and dovish remarks from Fed officials - including New York Fed President and FOMC Vice Chair John Williams, and San Francisco Fed President Mary Daly - strengthened bets for a December cut.

There "have been enough dovish signals for Fed centrists to justify an additional risk-management cut," Nomura strategists said in a note dated December 5.

Yet, Nomura said, "the December decision remains a close call," echoing a similar view from top brokerages.

"We expect four hawkish dissents against a decision to cut rates. We also expect a dovish dissent from Governor (Stephen) Miran in favor of a 50bp cut," Nomura added.

Nomura also continues to expect the Fed to cut rates by 25 bps each in June and September next year under a new Fed chair.

Expectations are that White House economic adviser Kevin Hassett could replace Fed Chair Jerome Powell next May. Hassett is seen to likely favor aggressive interest rate cuts.

"We see the case for a December insurance cut, but it is more 60-40 than 95-5 in our view, given how limited and unrevealing post-shutdown data releases have been," Standard Chartered said, and it forecast the Fed to stay on hold through 2026.

Traders are currently pricing in a 89.6% chance of a quarter-point interest rate cut at the monetary policy meeting on December 9-10, as per the CME FedWatch Tool.

(Reporting by Kanchana Chakravarty and Siddarth S in Bengaluru; Editing by Harikrishnan Nair)