Tariff Turbulence: Central Banks Under Pressure

Nomura predicts that U.S. and European central banks will cut interest rates following President Trump's imposition of tariffs. These tariffs are expected to dampen economic growth and increase inflation, prompting quicker monetary policy adjustments. Nomura revised its forecasts for U.S. GDP growth and European Union rates.

In a significant economic development, Nomura has projected interest rate cuts for both the U.S. and Europe, following recent tariff impositions by President Trump. These moves are feared to stymie economic growth and elevate inflation, thereby compelling the Federal Reserve and the European Central Bank (ECB) to make swift policy changes.

Nomura has downgraded its U.S. GDP growth forecast from 1.5% to 0.6% and raised its inflation estimate, anticipating that the Federal Reserve will lower rates from December. This adjustment comes as the U.S. grapples with the potential impact of a global trade war, fueled by Trump's broad tariff measures.

The ECB is expected to act even more rapidly, as tariffs heighten EU duties to 20%. Nomura suggests the ECB could implement rate cuts as soon as April and June, rather than just in June, aiming to stabilize the regional economic outlook amid predicted inflationary pressures and reduced growth prospects.

(With inputs from agencies.)