Urjit Patel, governor of the Reserve Bank of India, speaks during a news conference in Mumbai.(Photographer: Dhiraj Singh/Bloomberg)

Nomura Expects Interest Rate Hike Due To ‘Uncomfortably High’ Core Inflation

Nomura expects a 50 basis point hike in key interest rates during the Reserve Bank of India's monetary policy review meeting tomorrow.

“The core inflation momentum has been uncomfortably high due to which we think there is a case to front-load the rate hike,” said Sonal Varma, chief India economist at Nomura, in a conversation with BloombergQuint today. “The peak in core inflation is largely due to non-tradeable services like recreation.”

Going ahead, the managing director at the Japanese brokerage expects the central bank to be in "wait and watch mode”. There can also be a prolonged pause in rates if growth and inflation momentum slow down, she said.

Also read: Understanding The Men And Women Of India’s Monetary Policy Committee

Watch the full conversation here: