NEW DELHI — Nomura Securities has issued a new outlook on the Reserve Bank of India’s (RBI) repo rate, projecting it to climb to 5.75 per cent by the end of 2026. The brokerage firm expects the central bank to lift the rate twice, each time by 25 basis points, after the current 5.25 per cent level set in the last policy meeting.
Nomura’s forecast
In a research note released on 28 September 2026, Nomura’s senior economist team outlined a scenario in which the RBI would raise the repo rate by 50 basis points in total over the next twelve months. The firm cited the persistence of headline inflation above the 4 per cent target and the need to keep the monetary stance tight as key drivers of the projected hikes.
RBI’s recent policy moves
The RBI’s Monetary Policy Committee (MPC) has kept the repo rate unchanged at 5.25 per cent since the March 2026 meeting. The committee’s latest statement highlighted that inflationary pressures remain elevated, with the Consumer Price Index (CPI) for all items at 4.3 per cent in August 2026, above the 4 per cent medium‑term target.
In its latest policy statement, the RBI noted that the economy was showing signs of resilience, with GDP growth at 6.1 per cent in the first quarter of 2026. However, the central bank reiterated that it would remain vigilant and could adjust rates if inflationary trends continued.
Market expectations
Market participants have priced in a steep 125‑basis‑point hike over the next year, according to a Business Standard report. The market’s expectation contrasts with Nomura’s more conservative two‑step approach. The Economic Times article highlighted that the RBI is unlikely to implement a 125‑basis‑point increase, dismissing fears of a sharp rise.
Bond yields have reflected the market’s view of a moderate hike. The 10‑year government bond yield has hovered around 6.2 per cent, slightly above the current repo rate, indicating a modest risk premium for future rate increases.
Implications for borrowers and investors
A rise in the repo rate would translate into higher borrowing costs for banks, which in turn could lead to increased lending rates for households and businesses. Nomura’s forecast suggests that the cost of credit could rise by roughly 25 basis points in the next six months, followed by a similar increase in the second half of the year.
For investors, a tighter monetary stance may support the rupee against the US dollar, as higher rates tend to attract foreign capital. The rupee has strengthened to 82.5 per dollar in the last month, following the RBI’s decision to keep the repo rate unchanged.
Policy context and outlook
The RBI’s decision to keep the repo rate steady in March 2026 was part of a broader strategy to balance inflation control with growth support. The committee’s statement emphasized that the central bank would consider a range of indicators, including employment data and global commodity prices, before making further adjustments.
Nomura’s analysts noted that the RBI’s policy framework allows for incremental adjustments. The firm’s model projects that the first 25‑basis‑point hike could occur in October 2026, with a second hike in December, bringing the rate to 5.75 per cent.
These projections are based on the RBI’s historical response to inflationary pressures and the current trajectory of the Indian economy. Nomura also highlighted that any deviation from the forecast would likely be driven by a sudden change in inflation dynamics or a shift in global economic conditions.
Conclusion
While the RBI has not yet announced any changes to the repo rate, market participants and analysts are closely monitoring inflation data and the central bank’s policy statements. Nomura’s two‑step hike scenario offers a middle ground between the market’s expectation of a steep rise and the RBI’s cautious stance.
