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Nomura Sees Limited RBI Rate Hikes, Inflation Cooling
Nomura is a financial company that is making a prediction about India’s interest rates.
It thinks the Reserve Bank of India may raise rates only a little, by 25 to 50 basis points.
Its main forecast is for two small increases, one in October and one in December.
These increases would bring the policy rate to 5.75%.
Financial markets are expecting much bigger increases over the next year.
Nomura says prices are not rising as broadly because core inflation has fallen from about 5% to about 3%.
Food prices are still a risk because they can push inflation higher.
Nomura expects inflation to ease during 2027 and fall below 4% in the second half of that year.
The RBI has not promised to follow this predicted rate path.
Nomura expects the Reserve Bank of India to raise rates by 25–50 basis points in the current cycle.
The brokerage assigns an 80% probability to a limited adjustment rather than a tightening cycle exceeding 75 basis points.
Nomura’s central forecast includes 25-basis-point hikes in October and December, taking the policy rate to 5.75%.
Markets are pricing nearly 125 basis points of hikes over the next year, which Nomura considers excessive.
Nomura forecasts inflation at about 5.3% in the first half of 2027 and below 4% in the second half.
- Who
- The Reserve Bank of India and analysts at Nomura.
- What
- Nomura expects the RBI to limit interest-rate increases to 25–50 basis points in the current cycle.
- Where
- New Delhi, India.
- When
- The projected rate increases could occur in October and December, with further hikes becoming less likely from February 2027.
- Why
- Nomura says core inflation has eased and shows limited signs of spreading, although food prices remain a near-term risk.
Nomura’s Limited-Hike View
Market’s Steeper-Hike Pricing
Expected monetary tightening
Nomura’s Limited-Hike View
Nomura gives an 80% probability to a limited cycle of 25–50 basis points and says a cycle exceeding 75 basis points is unlikely.
Market’s Steeper-Hike Pricing
Markets are pricing nearly 125 basis points of rate increases over the next year, a path Nomura considers more aggressive than current inflation conditions justify.
Key facts
- Predicted rate increase
- 25–50 basis points during the current cycle
- Nomura probability
- 80% probability of a limited adjustment cycle
- Projected policy rate
- 5.75% after two 25-basis-point increases
- Market pricing
- Nearly 125 basis points of hikes over the next year
- Core inflation
- Fallen from around 5% to about 3%
- 2027 inflation forecast
- About 5.3% in the first half and below 4% in the second half
- Fiscal-year forecasts
- CPI inflation of 5.2% in FY27 and 4% in FY28
Quotes
Nomura
Global brokerage whose analysts authored the report
“Given limited signs of generalisation, a tightening cycle is unlikely,”
thehansindia.com
Sources
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