With inflation figures continuing to reflect benign environment, the Reserve Bank of India is likely to go for a 25 basis points rate cut while announcing its bimonthly monetary policy on September 29, a report said.
The data on wholesale price index (negative 4.9 per cent) and consumer price index (3.66 per cent) continue to reflect a benign inflationary environment, said ratings and research firm India Ratings and Research.
While it expects the impact of base effect to reflect in higher inflation numbers for next month, they should remain within the Reserve Bank’s guided path of CPI of 6 per cent by the year end.
“With real interest rates remaining high and a gradual growth trajectory, India Ratings expects the regulator to cut the policy rates by 25 bps (25 basis points or 0.25 per cent) to 7 per cent during this month,” it said.
However, the agency said that uncertainty created by US Federal Reserve’s status quo may limit aggressive rate cuts and offer some protection against volatility.
Further, it expects rupee to appreciate during the week as a run up to the monetary policy announcement on September 29. “Key drivers would remain the expectations of a relaxation in foreign institutional investor limits for G-Secs, generalised risk-on in the short term and expectations of a rate cut in the policy,” it added.
But it said the currency remains vulnerable to a global risk-off situation, global growth and financial market concerns.