Within Target
Nomura sees India CPI inflation rising above 4% only once in rest of 2025
This story was originally published at 13:17 IST on 19 March 2025
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NEW DELHI – India's headline CPI inflation is likely to stay below the Reserve Bank of India's medium-term target of 4% throughout the rest of 2025, except in August, when it is seen at 4.1%, according to Nomura.
Retail inflation fell to a seven-month low of 3.61% in February from 4.26% in January, mainly because of a fall in food prices. February was the first time in six months when inflation was below the RBI's 4% target. Since September 2019, CPI inflaiton has been below 4% only three times.
This is about to change, with Nomura projecting retail inflation at 3.9% in March, April, and May. Inflation will then ease to 3.7% in June and July before rising to 4.1% in August, it said. Between September and December, CPI inflation is seen in the band of 3.6-4.0%.
"On-target headline inflation, below-trend growth and high real rates mean current policy rates are restrictive," Nomura's economists said in a report. "We expect 75 bp (basis points) of further rate cuts to a terminal rate of 5.50% by end-2025, with 25 bps cuts each in April, June and August," the report said. The RBI's Monetary Policy Committee lowered the repo rate for the first time in nearly five years in February, cutting it by 25 bps to 6.25%.
Nomura sees core inflation--which excludes food and fuel items, whose prices can be volatile--staying below 4% till December, having risen to a 15-month high in February. According to Nomura, core inflation is projected to average 3.7% in Mar-Dec, slightly lower than 3.9% seen in Jan-Feb. End
Reported by Shubham Rana
Edited by Tanima Banerjee
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