Synopsis : Nomura expects the RBI to cut rates by another 100 basis points by end-2025, citing weaker growth and easing inflation. A dovish stance and falling food prices could shape a more accommodative monetary path.
In a major forecast that could impact investor sentiment and borrowing costs, global financial services firm Nomura has projected that the Reserve Bank of India (RBI) may deliver an additional 100 basis points (bps) rate cut by the end of 2025. The RBI, during its April monetary policy meet, had already trimmed the repo rate by 25 bps and shifted its stance from "neutral" to "accommodative."
Nomura’s forecast comes amid signs of subdued inflation and slowing economic momentum, raising expectations that the central bank will prioritize growth support over inflation containment in the coming quarters. The firm believes the RBI’s GDP forecast of 6.5% for FY26 is overly optimistic, revising its own projection down to 5.8% due to global trade disruptions and weakening demand.
In March, CPI inflation eased to 3.3%, thanks to sharp monthly drops in food prices such as vegetables, eggs, and pulses. Core inflation also remained soft, bolstering the case for a rate cut cycle. Nomura emphasized that inflation is likely to stay below 4% through 2025, averaging 4.1% in FY26, though it did flag risks from ongoing heatwaves that could disrupt food supply.
Meanwhile, the merchandise trade deficit widened to $21.5 billion in March, up from $14 billion in February, mainly due to a surge in imports (up 11.4% YoY). While export growth turned positive, it remained tepid. The services trade surplus provided some relief, rising slightly to $17.9 billion.
Crucially, despite the temporary delay of US reciprocal tariffs, global trade remains fragile. With global crude oil prices falling, Nomura expects some positive current account impact, although foreign investment inflows remain weak, keeping the basic balance of payments negative.
As the RBI looks to balance liquidity, inflation, and growth, Nomura anticipates rate cuts of 25 bps in each of the next four meetings—June, August, October, and December. The terminal repo rate is now seen at 5.00%, down from its earlier forecast of 5.50%.
Disclaimer : This article is for informational purposes only and does not constitute investment or financial advice. Readers are advised to consult certified professionals before making any financial decisions.
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