New Delhi: A fall in retail inflation to a five-month low in August has raised hope of a cut in interest rate by RBI soon. “The sharp fall in retail inflation in August 2016 has accentuated the rate cut proposition in the next quarter itself,” said rating agency India Ratings and Research.
Retail inflation based on consumer price index came at 5.05 per cent in August due to slower rate of price increase in vegetables as well as food and beverages.
“After RBI kept its policy rate unchanged at 6.5 per cent at its August 9 meeting; this increases chances of a rate cut in October. But RBI might chose to wait for some more time before wielding the knife,” said rating agency Crisil.
HSBC said that RBI is expected to go for a 50 basis points rate cut over the remaining months of the fiscal as inflationary pressure is expected to stay contained thanks to good monsoon and falling vegetable prices.
“We expect a 50 bps rate cut over the remained of FY17 (October 2016 to March 2017),” HSBC said in a research note, adding a 25 bps cut is expected in October-December quarter and 25 basis points in January-March period.