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The Reserve Bank of India (RBI) is likely to cut key interest rates by 0.50 per cent to 7.5 per cent in the forthcoming monetary policy review on easing inflationary pressures, says a Credit Suisse research report.
According to the report: “The move would be best described as a belated pat on the government’s back following its September reform announcements.”
Positive surprises in the recent WPI inflation data – both headline and core – and likely ebbing of inflationary pressures may prompt the central bank to cut key interest rate in its next policy meet, it said.
“Following a break of nine months, we expect the Reserve Bank to cut the repo rate at its January 29 meeting, probably by 50 basis (0.5 per cent) points to 7.5 per cent,” it said.
Going forward, the repo rate is likely to drop to 6.75 per cent by July 2013, as the core and headline WPI inflation is likely to drop below 4 per cent and 6 per cent respectively by mid-2013, Credit Suisse Research Analyst Robert Prior-Wandesforde said in the research note.