Nomura Projects Two RBI Repo Rate Hikes Totaling 50 Basis Points by December 2026

According to Nomura's forecast, the RBI's repo rate could reach 5.75 per cent following anticipated hikes of 25 basis points each in October and December. The firm anticipates that the interest rate increases will help anchor inflation expectations at stable levels. The forecast assigns an 80 per cent likelihood to a scenario in which the RBI lifts borrowing costs by a cumulative 25 to 50 basis points. The RBI's benchmark lending rate is presently set at 5.25 per cent. The central bank held its benchmark lending rate steady at 5.25 per cent during its August 2026 Monetary Policy Committee gathering, leaving its broader policy position unaltered. For the fourth successive gathering, the MPC left the repo rate unchanged. In December 2025, the RBI adjusted its repo rate downward by 25 basis points, bringing it to 5.25 per cent. The bank anticipates a rate adjustment at the October MPC gathering, with a further 25 basis point rise projected for December. By the close of 2026, the repo rate would stand at 5.75 per cent. The firm anticipates a rate adjustment considerably below what traders in financial markets have priced in. Traders are currently pricing in roughly 125 basis points of monetary tightening over the coming year, whereas Nomura anticipates a more modest 25–50 basis points of increases throughout the current cycle. Nomura forecasts that the consumer price index will climb to 6.3 per cent in the fourth quarter, up from 8 per cent recorded in August. Forecasts place inflation at approximately 5.3 per cent during the first half of 2027, with a further decline to below 4 per cent anticipated in the latter half of that year. Nomura projects average CPI inflation of 5.2 per cent during the fiscal year 2027 period. The projection for FY28 stands at 4 per cent. The brokerage identified food price pressures as the primary near-term threat to the broader inflation trajectory. The Nomura breadth-of-inflation gauge climbed to 92.6 in August, up from 84.8 recorded in January. The gauge remained beneath its benchmark reading of 100, pointing to price pressures that had yet to broaden their reach across the wider economy. The Nomura India Composite Leading Index retreated to 99.8 during the fourth quarter of 2026, down from 100.5 recorded in the opening half of the year. The firm anticipates that forthcoming data will point to below-average expansion in the economy. According to Nomura, the RBI is projected to implement a modest rate adjustment in response to rising inflation, though subdued economic expansion is expected to constrain the extent of any tightening cycle.

Nomura Projects Two RBI Repo Rate Hikes Totaling 50 Basis Points by December 2026

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Nomura Projects Two RBI Repo Rate Hikes Totaling 50 Basis Points by December 2026

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