Nomura Forecasts Limited Rate Hikes for Reserve Bank of India
Nomura reports that the Reserve Bank of India will likely limit rate hikes to 25-50 basis points, contradicting market expectations of a 125 basis point increase.
Global brokerage Nomura Holdings reports that financial markets are pricing in an excessive 125 basis point rate hike for India over the next year. In a September 25 report, the firm argues that a broader tightening cycle is unlikely due to limited signs of broad-based inflation, assigning an 80 percent probability to a limited recalibration cycle of 25-50 basis points.
Nomura suggests the Reserve Bank of India may implement 25 basis point hikes in October and December to reach a terminal rate of 5.75 percent, though it notes the possibility of only a single hike. While the central bank faces pressure from higher oil and food prices and expected actions by the Federal Reserve System, Nomura expects the probability of further increases to diminish after February 2027 as consumption slows.
Inflation forecasts indicate headline consumer price inflation will rise to 6.3 percent in the fourth quarter of 2026. This is projected to ease to 5.3 percent in the first half of 2027 before falling below 4 percent in the second half of that year.
