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Fed seen holding rates for now, cuts likely later in 2026: NomuraRobert Subbaraman, Head of Global Macro Research at Nomura, assesses India’s economy amid a “triple shock” of tariffs, tech disruption, and rising energy prices—warning of a near-term slowdown while highlighting its underlying structural resilience.By Reema Tendulkar   |  Prashant Nair   |  Nigel D'Souza  April 28, 2026, 11:50:47 AM IST (Published)5 Min ReadCentral banks across the world are likely to keep rates on hold for now, even as they signal readiness to act if inflation pressures build, according to Nomura’s Head of Global Macro Research Robert Subbaraman. He expects policymakers to stay in a wait-and-watch mode.

He said the US Federal Reserve is unlikely to move immediately, as the US economy is relatively insulated from the current shock, given its position as a net energy exporter. “We have rate cuts in September and December, so not straight away. When he [new Fed chief] gets in his chair, he will take a little bit of time to settle in,” Subbaraman said.

The Federal Open Market Committee is scheduled to meet on June 16-17. According to the CME FedWatch Tool, markets are pricing in a 100% probability that rates will remain unchanged at 3.50-3.75%.

Watch the full conversation here or scroll for edited excerpts.These are edited excerpts from the interview.Q: Today is Federal Open Market Committee (FOMC) day one, and Jerome Powell’s last meeting as Chair begins. You have titled your note “central banks’ bark will be bigger than their bite.” What’s your expectation from global central banks this week and through the year?

A: I think central banks around the world have many officials sounding more hawkish, so they are barking louder. That makes sense because they want to give markets the perception that they are ready to raise rates if they start to see second-round effects from the headline spikes in the consumer price index (CPI).

If inflation expectations go up and wage demands pick up, then inflation feeds into core inflation — and that’s what central banks want to avoid. So, there will be barking, but I don’t think they will be biting in the sense of hiking rates at this early stage.

It’s more wait and see, but sounding hawkish and warning that they are ready to act is logical. This week, we have multiple meetings — the Federal Reserve, Bank of Japan, Bank of Canada, European Central Bank, and Bank of England — and we expect them all to remain on hold.

Q: You believe the Federal Reserve is unlikely to raise rates. But why not hold steady through 2026, given rising crude and gas prices? Why do you still expect two rate cuts?

A: For the US economy, it is probably the most insulated among major economies from this energy shock. Gas prices are rising, but the US is a large net energy exporter, so it’s not that exposed.

The bigger reason for expecting rate cuts is the likely change in the Fed Chair in June, with Kevin Warsh expected to take over. Our view is that he believes the AI boom will provide a significant productivity boost and be disinflationary. He would want to position monetary policy ahead of that.

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So, we expect rate cuts — in September and December — not immediately. He will take time to settle in. Also, by the second half of the year, oil prices are likely to stabilise, and inflation momentum should ease. That gives further room to argue for rate cuts.

Q: There’s a disconnect between physical and futures oil prices. Physical markets seem tighter. Do you expect a readjustment higher?

A: You’re right — the physical or spot market for oil has a high premium relative to futures prices. There is a clearly shrinking supply. Floating storage is being used up, and strategic reserves are being drawn down.

It comes down to timing. If the Strait of Hormuz remains closed for longer, this supply-demand imbalance — more visible in the physical market — will start reflecting in futures prices, and that gap will close.

For now, futures markets still hold hope that a deal can reopen supply routes. But we are running out of time. If there is no resolution, there is a significant risk of a renewed spike in oil futures prices.

Q: How do you assess India’s economy amid tariffs, AI disruption, and now rising oil prices? What about the Reserve Bank of India (RBI) policy?

A: I had earlier spoken positively about India’s backdrop, and I still believe that. India started with a Goldilocks economy — strong growth and low underlying inflation. That created fiscal space, and monetary policy gained credibility.

But now it’s facing a triple shock — tariffs, software disruption, and oil. That is starting to weigh on the economy. Gross domestic product (GDP) growth was 7.3% in Q1; we expect it to slow further, with Q2 and Q3 around 6.5%.

The longer oil and energy prices stay elevated, the bigger the impact on growth, fiscal deficit, and inflation. The government may have to reduce subsidies, which adds inflationary pressure.

So, it is getting more challenging, but India is still in a better position than it would have been without that strong starting point.

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