Global economic outlook and monetary-policy recalibration Report Interpretation

Overview

This global macro outlook revises policy-rate forecasts higher in response to persistent inflation and renewed energy-price pressure. Nomura’s central view is that the resulting moves are resumptions or recalibrations of existing cycles, not the beginning of extended global tightening campaigns.

Core views

Nomura raises its global policy-rate outlook because inflation has made little progress and oil prices have risen again. It expects the Fed to raise rates by 25bp in September and another 25bp in December before holding through 2027, while the ECB is expected to hike in December 2026 and March 2027, bringing its deposit rate to 3.00%. The institution stresses that markets price close to four additional Fed and ECB hikes by end-2027, materially more than Nomura’s forecast. It likewise expects fewer hikes than markets for the BOJ, BOE, BoC, RBA, RBI and BOK. The reasoning is that many policy rates are already near or above neutral, much inflation is cost-push and therefore growth-negative over time, and rising bond yields are themselves tightening financial conditions while limiting fiscal-stimulus room. For the US, Nomura changed its call to two 25bp hikes after limited inflation progress, core PCE remaining above 3% year-on-year, and energy-price risks shifting upward. Growth remains supported by broadening business investment and resilient consumption, although housing is weak and consumption is expected to slow modestly after Q2. Nomura expects core PCE inflation to moderate in 2027 as wage growth, tariff effects and rent pressures ease. The principal risks cited are weakened Fed credibility or political pressure, renewed geopolitical tightening, an AI-boom reversal that hits asset prices and investment, and a further goods-inflation round from memory-chip shortages or supply-chain disruption. In the euro area, Nomura expects the Iran war’s sustained pressure on energy prices, resilient activity and above-potential 2027 growth—supported by German fiscal easing and strong Spanish growth—to justify two more ECB hikes. Euro-area GDP grew 0.6% quarter-on-quarter in Q2 2026, although excluding volatile Ireland, growth has been around 0.3% quarter-on-quarter since early 2024. August HICP inflation rose to 3.3% year-on-year, while stronger core-goods prices reflect supply-chain disruption, higher freight costs and energy prices. Nomura expects inflation to remain elevated through year-end and notes that wage bargaining could delay second-round effects until 2027. Asia is differentiated by AI-led trade strength, domestic-demand conditions and inflation exposure. Nomura expects Taiwan, Malaysia and Singapore to outperform, while remaining cautious on Indonesia and Thailand. Taiwan’s AI-server and chip exports support its 12.5% 2026 GDP-growth forecast; Korea’s semiconductor and computer exports rose 209.0% and 419.5% year-on-year in August; and Malaysia’s AI-related electronics demand supports forecasts of 5.6% GDP growth in 2026 and a 25bp policy-rate hike in Q4. Singapore is forecast to grow 5.7% in 2026 as tech demand, construction and domestic demand support activity, but core inflation is expected to rise amid a positive output gap and loose financial conditions. China remains a counterpoint: Nomura expects weak domestic momentum despite incremental fiscal, financing and property-support measures. It forecasts 4.3% year-on-year GDP growth in Q3 and sees limited lift from recent easing because a K-shaped economy constrains large-scale stimulus. Imported oil and chip costs led Nomura to lift its 2026 CPI and PPI forecasts to 0.9% and 2.5%, respectively, but ample liquidity and low government-bond yields underpin its base case of no RRR or rate cuts this year. Japan is expected to remain on a capex-led recovery path, with core CPI moving through acceleration to Q1 2027, deceleration from Q2 2027 as oil prices and the yen evolve, and eventual stabilization around 2%; the BOJ is forecast to hike in September 2026, January 2027 and April 2027 to 1.75%. Elsewhere, Australia faces a 60-65% estimated probability of a 25bp RBA hike on 29 September as stronger GDP and CPI data, limited spare capacity and high oil prices outweigh softer housing and rising unemployment. India’s stronger growth and accelerating food, oil and core inflation prompted a shift from a hold to 50bp of RBI hikes in 2026, alongside higher FY27 GDP and CPI forecasts of 7.0% and 5.1%. The UK and Canada are exceptions to the broad tightening theme: Nomura expects the BoE and BoC to hold through 2026, although risks are tilted toward tighter policy. Türkiye is expected to ease gradually, with two 100bp cuts projected in October and December after the policy rate was held at 37%.

Analysis framework

Nomura compares current growth, inflation, labour-market, trade, fiscal and financial-condition data with prior forecasts and market pricing. It then translates energy prices, supply-chain conditions, domestic demand and policy settings into modal country-level forecasts for GDP, inflation, external balances and policy rates.

Methodology notes

• Macroeconomics

  Modal macroeconomic forecasting

  Nomura presents its central forecasts as modal forecasts—the single outcomes it considers most likely—using country-level projections for growth, inflation and policy rates.

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  Energy and semiconductor cost pass-through

  The report traces higher oil, freight and chip costs through supply chains into goods and consumer-price inflation, and assesses the resulting central-bank response.

Key data

• Fed policy forecast25bp hikes in September and December 2026Nomura then expects an extended hold through 2027.
• ECB deposit-rate forecast3.00% by March 2027Two further hikes are expected in December 2026 and March 2027.
• China Q3 2026 GDP forecast4.3% y-o-yBelow consensus, reflecting persistent domestic weakness and limited stimulus impact.
• India FY27 GDP forecast7.0% y-o-yRaised by 0.4pp from 6.6%.
• Taiwan 2026 GDP forecast12.5% y-o-yAbove consensus of 10.7%, supported by the AI boom.
• Korea semiconductor export growth209.0% y-o-y in AugustComputer exports rose 419.5% y-o-y, supported by AI infrastructure demand and memory prices.

Impact & implications

The report portrays higher energy prices and sticky inflation as broadening the case for selective tightening, but argues that restrictive starting-rate levels, weaker growth effects from cost-push inflation and tighter bond-market conditions should limit the cumulative scale of hikes. AI-linked trade and semiconductor demand remain a relative source of support in parts of Asia.

Risks

• Further escalation of Middle East tensions could raise commodity prices, tighten financial conditions and increase inflation pressure.
• A protracted Iran conflict could intensify supply-chain disruption and sustain elevated energy costs.
• A downturn in the AI or technology cycle could weaken investment, exports and growth in AI-exposed Asian economies.
• Trade tensions and higher tariffs could damage confidence, exports and investment, particularly in Canada and China.
• El Niño, higher food prices and persistent commodity inflation are cited as upside inflation risks in several Asian economies.

What to watch

• September and December 2026 Fed meetings and whether inflation begins to progress toward target.
• ECB policy decisions in December 2026 and March 2027, together with energy-price developments and euro-area wage data.
• Oil prices, the Iran conflict and evidence of broader second-round inflation effects.
• The durability of AI-driven semiconductor, server and electronics demand across Taiwan, Korea, Malaysia, Hong Kong and Singapore.
• The scale and effectiveness of additional Chinese fiscal and policy support.
• Housing-market developments in Australia, Canada, Hong Kong and Taiwan.