RBI may hike rates twice in 2026 as inflation set to breach 6%: Nomura
Synopsis
Nomura's top macro strategist Rob Subbaraman is calling two RBI rate hikes — in October and December 2026 — as India's inflation heads above 6%. Even as GDP is seen holding at 7% for FY27, the central bank may no longer be able to stay on the sidelines while the US Fed also eyes further tightening and global energy prices remain at record highs.
Key Takeaways
Nomura forecasts the RBI will hike rates at both its October and December 2026 monetary policy meetings.
India's inflation is expected to breach 6 per cent — the upper limit of the RBI's tolerance band — in coming months.
Nomura projects India's GDP growth at 7 per cent for FY27 despite the anticipated tightening.
The US Federal Reserve is expected to deliver at least one more rate hike in 2026 , likely in December , with 12 of 18 FOMC members projecting a hike.
The Fed's most recent move was a 25 basis point hike to 3.75–4 per cent .
Rising US gasoline ($4.50) and diesel ($6.50) prices are amplifying global inflationary pressures, complicating central bank decisions.
Global financial services firm Nomura's Head of Global Macro Research, Rob Subbaraman, has said he expects the Reserve Bank of India (RBI) to raise interest rates at both its October and December 2026 monetary policy committee meetings, as inflation pressures build and threaten to exceed the central bank's upper tolerance threshold. The forecast, made on 22 September 2026, comes even as India's broader growth trajectory remains robust.
Inflation Outlook and Rate Hike Forecast
Subbaraman said India's inflation is expected to breach 6 per cent in the coming months — the upper limit of the RBI's comfort band — making rate hikes increasingly likely. Despite this, Nomura projects India's GDP growth at 7 per cent for FY27, signalling that the central bank may feel confident enough to tighten without undercutting economic momentum. This would mark a notable policy pivot after a prolonged pause cycle.
India's Investment Opportunity and Global Value Chain Prospects
Beyond monetary policy, Subbaraman flagged India's structural opportunity to attract greater global investment, particularly through higher-end manufacturing that could elevate the country's position on the global value chain. He noted, however, that India could face a lag in select sectors if the artificial intelligence (AI) investment narrative remains dominant in the United States and Northeast Asia, diverting capital away from emerging market manufacturing plays.
On the capital account, Subbaraman pointed to stronger-than-expected flows into FCNR-B deposits and the possibility of a robust balance-of-payments surplus as factors that could support the rupee and external buffers.
Global Policy: Fed Rate Hike on the Cards
On the global front, Subbaraman said at least one more US Federal Reserve rate increase is expected in 2026, likely in December, with the risk of additional hikes if inflation remains elevated. He noted that the latest Federal Open Market Committee (FOMC) projections reflect a broadly hawkish direction: of 18 policymakers, 12 expected one more hike this year, four see two more, and only two expect no further increase. The Fed had already raised its policy rate by 25 basis points to 3.75–4 per cent at its most recent meeting.
Geopolitical Tensions and Energy Prices
Markets are closely watching diplomatic developments at the UN General Assembly, including an expected meeting between US President Donald Trump and Chinese President Xi Jinping this week. Subbaraman said markets are hoping diplomacy can ease US-China trade restrictions and bring down energy costs and long-term yields.
He warned that Iran retains significant leverage given high energy prices, noting that elevated fuel costs are squeezing downstream oil businesses — with US gasoline prices nearing $4.50 and diesel prices at record highs near $6.50. These dynamics, he cautioned, amplify inflation risks globally and could complicate the policy calculus for central banks including the RBI.
What to Watch Next
The RBI's next monetary policy committee meeting is in October 2026, when markets will get the first indication of whether the central bank moves in line with Nomura's forecast. Any upside surprise in India's consumer price index print in the interim would strengthen the case for a hike. Analysts will also track the outcome of the Trump-Xi talks for any easing of trade tensions that could moderate global inflationary pressures.
Point of View
Which has historically been reluctant to tighten into a growth cycle, will follow through — or treat Nomura's forecast as a ceiling rather than a base case. The 6 per cent inflation trigger is real, but the RBI has previously tolerated near-breach conditions without acting, citing transient supply-side factors. What makes this cycle different is the Fed's hawkish posture and the risk of rupee depreciation pressure if the rate differential narrows too sharply — which could force the RBI's hand even if domestic demand alone would not.
NationPress
22 Sept 2026
Frequently Asked Questions
Why is Nomura predicting two RBI rate hikes in 2026?
Nomura expects the RBI to raise rates at its October and December 2026 meetings because India's inflation is forecast to breach 6 per cent — the upper bound of the central bank's tolerance range. The call is reinforced by a hawkish US Fed environment and global energy price pressures.
What is Nomura's GDP growth forecast for India in FY27?
Nomura projects India's GDP growth at 7 per cent for FY27, indicating that the economy is seen as resilient enough to absorb a tightening cycle without a sharp slowdown.
How many US Fed rate hikes does Nomura expect in 2026?
Nomura expects at least one more US Federal Reserve rate hike in 2026, likely in December. Of 18 FOMC policymakers, 12 projected one more hike this year, four expected two more, and only two anticipated no further increase.
What is the significance of India breaching the 6 per cent inflation mark?
6 per cent is the upper limit of the RBI's inflation tolerance band. A sustained breach would formally pressure the central bank to act, as it is mandated to keep inflation within the 2–6 per cent range. This would make rate hikes difficult to defer.
How could geopolitical developments affect India's monetary outlook?
Diplomatic outcomes at the UN General Assembly — including any Trump-Xi meeting — could ease US-China trade tensions and bring down global energy prices, which would moderate inflationary pressures and potentially reduce the urgency of RBI rate hikes. Conversely, continued high energy prices would reinforce the case for tightening.
