Stories
Nomura's Subbaraman: Higher Interest Rates are the New Normal, RBI to Hike Twice More
C
CNBC TV18•25-09-2026, 15:06
Nomura's Subbaraman: Higher Interest Rates are the New Normal, RBI to Hike Twice More
- •Robert Subbaraman, Head-Global Macro Research at Nomura, expects interest rates worldwide to enter a "higher-for-longer" phase, reminiscent of the 1980s and 1990s.
- •He anticipates the Reserve Bank of India (RBI) will raise rates twice more this year, in October and December, due to rising inflation driven by food and energy prices.
- •Subbaraman attributes global sticky inflation to energy costs, AI-linked electricity and chip demand, and the US fiscal deficit, suggesting further rate hikes by the US Federal Reserve.
- •Despite global rate increases, he does not foresee a repeat of the 1997-98 Asian financial crisis's capital flight from emerging markets, citing more flexible exchange rates and improved fiscal positions in EM central banks.
- •India's balance of payments is expected to see a significant surplus in the coming months, credited to the government's FCNR deposit scheme for rebuilding foreign exchange reserves.
Key Questions Answered
Nomura expects the RBI to raise interest rates in October and December because inflation is becoming an issue in India, driven by food and energy prices along with a rising long end of the yield curve.
Despite global rate hikes and historical trends of capital flight, India's balance of payments is expected to be in a significant surplus in the coming months, largely boosted by the government's FCNR deposit scheme rebuilding foreign exchange reserves.
Global interest rates are entering a higher-for-longer phase due to sticky inflation from energy costs, AI-linked electricity and chip demand, a US fiscal deficit near 6% of GDP, and public debt reaching around $40 trillion.
