Will RBI announce steep rate hikes? Nomura sees up to 50 bps increase by Dec, dismisses 125 bps hike fears
Nomura expects the RBI to pursue a limited tightening cycle, with a possible 50 bps rate hike by December, as food and energy pressures rise but underlying inflation remains contained.
The Reserve Bank of India (RBI) is expected to hold its Monetary Policy Committee (MPC) meeting from October 5 to October 7, according to Nomura. While markets anticipate steep rate hikes, Nomura suggests that the situation is different, predicting a cumulative 50 bps rate hike instead of the market's 125 bps expectation. The international brokerage believes that India's inflation trend has moderated, with no signs of broadening, which supports their view.
Nomura forecasts a 25 bps rate hike by the RBI in October and December, leading to a terminal rate of 5.75% to anchor expectations. They expect the rupee to underperform the euro in the medium term due to RBI's dollar accumulation, portfolio flow, and current account deficit challenges.
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