Politics · India Bureau
RBI to reach 5.75% terminal rate with October and December hikes: Nomura
Japanese brokerage Nomura forecasts the Reserve Bank of India will raise its key policy rate by 25 basis points in both October and December, bringing the terminal rate to 5.75 percent. Rate hikes are expected to pause thereafter as inflation pressures ease and consumer spending softens.
LSN India ·
The Reserve Bank of India is poised to implement consecutive rate increases totaling 50 basis points over the coming months, according to a Tuesday report from Nomura, a major global financial services group. The brokerage anticipates 25 basis point hikes at both the October and December monetary policy review meetings, culminating in a terminal rate of 5.75 percent—the peak level expected within the current tightening cycle.
Nomura noted a caveat to its baseline forecast, acknowledging "some risk" that the central bank could opt for a single rate increase before pausing. The terminal rate represents the maximum level policymakers are expected to reach before halting or reversing monetary tightening.
Looking ahead to 2027, Nomura expects the probability of further rate hikes to diminish significantly from February onwards. The shift reflects anticipated softness in consumer spending and a more benign inflation trajectory for the year ahead. Cyclical pressures from food and energy prices are expected to moderate, reducing upward pressure on overall price growth.
The forecast reflects Nomura's assessment that inflation risks are gradually receding as the RBI's cumulative rate increases work through the economy. The anticipated consumption slowdown is expected to further ease demand-side inflationary pressures, supporting the case for monetary policy to turn accommodative in the coming year.