RBI likely to cut rate by 0.25%

The Reserve Bank is likely to cut the benchmark rate by 0.25 per cent in its monetary policy review as inflation is likely to remain subdued on the back of average rainfall and lower commodity prices, said Moody's Analytics, a division of Moody's Corporation. "The Reserve Bank of India could deliver fireworks in its monetary policy meeting on Tuesday by cutting the repo rate by 25 basis points to 7 per cent," it said in a report, 'Asia Spotlight: More Rate Cuts in India'. It said dim forecasts of below-average rains have not come to fruition and rainfalls have been closer to the long-term average with encouraging signs for kharif crop sowing.

"There have been double-digit increases in areas sown compared with the last year for major kharif crops. And although the monsoon season is not over yet, we believe RBI has an opportunity to stay ahead of the curve and cut rates because better food supply will likely cap inflation," Moody's Analytics said. Monsoon rainfall has picked up in July and the pace is likely to continue in August. The Met department had in June projected a deficient monsoon this year.

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