Nomura expects the US Federal Reserve to cut interest rates by 25 basis points in September, bringing forward its easing forecast, amid signs of milder US inflation in July and early cracks in the labor market.

The Consumer Price Index rose 0.2 per cent last month, easing from a 0.3 per cent gain in June and broadly in line with economists’ expectations, while annual inflation came in slightly below forecasts, according to data released this week.

The brokerage expects two more 25-bp reductions, in December 2025 and March next year, but said a 50-bp cut next month is unlikely as “The labor market is slowing, but there are few signs of stress, and broader financial conditions remain easy.”

The brokerage also lowered its core Personal Consumption Expenditures (PCE) estimate to 0.243 per cent for July, from 0.325 per cent, citing softness in segments such as prescription drugs and software.

Traders, on average, are pricing in 60.4 bps of Fed rate cuts by the end of the year, with a 94.2 per cent probability of a 25-bp reduction in September, according to data from LSEG and the CME Group’s FedWatch tool.

Other top brokerages, including J.P.Morgan, Citigroup and Wells Fargo retained their stance, for a September rate cut.