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The Week Ahead - Central Banks' Bigger Bark Than Bite

nomura-week-ahead-podcast economics-business-work Apr 24, 2026 source →
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economics-business-work
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The Week Ahead - Central Banks' Bigger Bark Than Bite

Claims from this story

Every atomic assertion extracted from the underlying record, ranked by evidence strength.

No too many fireworks are expected in central bank decisions.

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Kevin Warsh was laying the groundwork for the case to cut rates in the future during his confirmation hearing.

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Kevin Warsh, as a Federal Reserve Chair nominee, is suggesting the need for a new approach by the Federal Reserve.

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The risk of this inflation shock morphing into a negative growth shock for the global economy is reasonably high.

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The War Powers Act is very unlikely to constrain what the President can do.

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Talks between the United States and Iran seem to have stalled.

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Stalled talks between the United States and Iran are driving oil prices higher.

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The United States dollar is inching up again.

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Stock markets look resilient, led by the United States.

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Central banks will be in the spotlight in the coming week.

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All eyes will be on central bank signals and their assessment of short-run policy responses.

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Central banks are weighing the fallout from the Iran conflict regarding inflation risks versus negative growth implications.

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Rate hikes are still being priced in by markets.

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Rob Subraman, head of global macro research at Nomura, thinks central banks' bark will be bigger than their bite.

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For the Federal Reserve next week, there will be no dot plot or updated Summary of Economic Projections (SEP) at this meeting.

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Most Federal Reserve officials appear comfortable with a wait and see approach.

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Some dovish officials, including Governor Wall and New York Fed President Williams, recently flagged inflation risks from the Iran war.

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Governor Wall and New York Fed President Williams acknowledged some of the better labor market data seen recently.

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There is likely to be some pushback on the easing bias within the Federal Reserve committee's discussion.

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The Federal Reserve is not expected to change anything dramatic about its statement or rhetoric.

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Kevin Warsh talked about productivity growth being disinflationary, which ought to allow the Federal Reserve to cut rates even amid strong growth.

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Kevin Warsh pushed back against core PCE as a measure of inflation, suggesting the Federal Reserve might be better off using a trimmed mean indicator or incorporating private sector data.

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Trimmed mean indicators and private sector data currently give a more sanguine impression of inflation.

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Nomura still expects a couple of rate cuts later this year.

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The War Powers Act creates a 60-day deadline for President Donald Trump to seek congressional approval for military action, which would be May 1st.

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Presidents have mostly ignored the War Powers Act in the past.

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The One Big Beautiful Bill Act last year included significant surplus funding for the Department of Defense, around $150 billion.

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The Department of Defense's additional funding has very little oversight and a lot of discretion.

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The employment cost index on April 30th and ISM manufacturing on May 1st are important data prints.

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Both the employment cost index and ISM manufacturing are likely to continue the theme of hawkish data.

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A reacceleration in wage costs is expected after some slowdown late last year.

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Nomura forecasts no change in policy at the Bank of England's April meeting.

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The Bank of England sees current rates as marginally restrictive.

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The Bank of England's growth forecasts could be revised down marginally.

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The Bank of England's inflation forecasts could be revised up marginally, especially in the near term due to fuel pump prices.

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Markets will focus on the split of the Bank of England's vote, specifically whether any members vote for a hike.

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Nomura does not expect any change of policy at the European Central Bank meeting.

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Almost 10 of the 26 European Central Bank governing council members pushed back against the ECB doing anything at this April meeting since April 17th.

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Markets are currently pricing around two to three rate hikes by December this year for the European Central Bank.

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Lagarde is expected to refrain from endorsing any rate hikes and emphasize that European Central Bank policy will depend on the longevity and intensity of the Iran war.

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The labor market in both the United Kingdom and the Euro area is cooler now than back in 2022.

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Market pricing for firms' pricing power is less now than back in 2022.

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The labor market is potentially slightly tighter in the Euro area relative to the United Kingdom.

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Firm pricing power is slightly more in the Euro area than the United Kingdom.

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The European Central Bank would be more at risk of seeing second-round inflation effects than the Bank of England.

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If one central bank were to raise rates, it is more likely the European Central Bank than the Bank of England.

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If the Strait of Hormuz is closed for too long, it could become a lack of supply in terms of oil shock.

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Markets are pricing a very large disconnect between physical and futures/paper oil, the largest in a very long time.

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Nomura expects the Bank of Japan to keep rates unchanged.

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The market is pricing in less than a 10% chance of a Bank of Japan hike.

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After the United States strike on Iran, the Bank of Japan had signaled some willingness to raise rates through early April.

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Since early April, the Bank of Japan appears increasingly cautious about upside inflation risks and downside risks to growth.

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Japan's real rates remain low compared with other economies.

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Governor Ueda still appears committed to gradually adjusting monetary easing through further rate hikes.

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A hike in June by the Bank of Japan is not assured.

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The Bank of Japan is expected to keep alive the possibility of an increase in the near term.

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The Bank of Japan's 2026 CPI forecast is expected to be revised up sharply to the mid 2% range, reflecting higher crude oil prices.

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Japan's GDP growth is likely to be revised down toward potential growth around the mid 0% area.

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The deteriorating Middle East situation may be reflected in the outlook but not enough to suggest a material hit to the Japanese economy.

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Underlying inflation matters more than headline CPI for policy decisions.

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