Japanese brokerage firm Nomura believes that the Reserve Bank of India (RBI) might reduce interest rates by another 100 basis points (1%) by the end of 2025. This is in addition to the 25 basis point cut announced in April. The central bank also changed its policy stance to “accommodative” to support growth, and said it would keep liquidity conditions easy by maintaining a 1% surplus in the banking system.
Nomura says inflation is expected to stay below 4% for the rest of 2025, averaging around 4.1% in FY26. In March, consumer price inflation (CPI) dropped to 3.3% from 3.6% in February, thanks to falling prices in key food items like vegetables, eggs, and pulses. Nomura believes that despite the ongoing heatwave, inflation risks remain low due to stable fuel prices and weak demand.
However, the brokerage disagrees with the RBI’s growth forecast of 6.5% for FY26. It expects India’s GDP to grow only 5.8% due to global uncertainties, including trade tensions and tariff issues. Because of this weaker outlook, Nomura has revised its estimate for the RBI’s final interest rate (called the terminal rate) to 5.00% from 5.50%.
Nomura expects the RBI to cut 25 basis points in each of its next four policy meetings—June, August, October, and December 2025. While keeping an eye on food prices and weather-related disruptions, it says low manufacturing costs and possible dumping of Chinese goods will likely keep core inflation in check.
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