Nomura Rules Out April Rate Cut by RBI as Inflation Outlook Firms

Nomura no longer expects the Reserve Bank of India (RBI) to cut interest rates in April, citing a likely uptick in inflation and what it describes as “stealth” policy easing already underway. The reassessment follows the release of India’s consumer price inflation data under a revised series that updates the weight of key components such as food and housing and incorporates online services to better reflect evolving consumption patterns.

Based on the new series, Nomura has raised its inflation forecast for the next fiscal year starting in April to 4.1%, up from 3.9% under the previous methodology. The brokerage had earlier assigned a 65% probability to a 25-basis-point rate cut to 5%, but now joins other global firms including Capital Economics and ANZ in expecting the central bank to hold rates. Nomura argues that the weighted average call market rate has already hovered around 5%—near the lower bound of the policy corridor—reducing the need for further easing.

The firm also projects a modest upside to inflation in the coming months, estimating a 10-basis-point increase for January–June under the new series and a larger 20–50 basis-point rise in the second half of the fiscal year. However, one-year forward inflation is still expected to fall below 4%, suggesting limited pressure for rate hikes. The RBI targets inflation within a 2% to 6% band, leaving policymakers room to maintain a confirming pause as price dynamics evolve.

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