New Delhi, June 3
The Reserve Bank of India (RBI) is expected to cut the repo rate by 100 basis points -- from 6 per cent to 5 per cent -- by the end of 2025, according to a Nomura report.
In its 'Asia H2 Outlook' report, the global brokerage noted an underperformance of both the gross domestic product growth (at 6.2 per cent compared to the RBI's projection of 6.5 per cent) and inflation (3.3 per cent compared to the RBI's target of 4 per cent).
Nomura said this is the reason why it expects the central bank to further reduce policy rates, including the repo rate.
Ahead of Friday's RBI repo rate decision, it anticipates a rate cut of 25 bps in June, August, October, and December 2025.
Nomura also sees India sticking to prudent fiscal practices. "We expect the government to stick to fiscal prudence, while monetary policy does the heavy lifting," it said in the note.
It expects the RBI to have more flexibility on the topside in foreign exchange, especially when it comes to USD/INR. "The RBI is likely to accumulate reserves on a softer US dollar, capping the Indian rupee appreciation," Nomura said.
The RBI’s Monetary Policy Committee (MPC) is set to meet from June 4-6. Analysts expect the Central Bank to go for a third consecutive rate cut of 25 basis points as inflation continues to remain below the median target of 4 per cent.