Ind-Ra expects RBI to go for a 25 basis points rate cut

A day ahead of RBI's bi-monthly monetary policy, rating agency Ind-Ra on Monday said it expects RBI to cut interest rate by 25 bps to 7% and sound cautious in its tone.

"India Ratings and Research (Ind-Ra) expects the Reserve Bank of India (RBI) to take a gradual route of repo rate moderation (by 25 bps to 7%) and sound cautious in its tone," the rating agency said in a statement.

Retail inflation was down sharply to 3.66% in August, from 5.4% at the time of RBI's previous policy announcement.

Wholesale prices have been falling in absolute terms and GDP deflator is negligible -- at its lowest in 16 years.

Ind-Ra said uncertainty will likely prevail in global markets on the delayed normalisation of rates in the US.

The rating agency believes that RBI will have limited headroom for a significant rate reduction in the upcoming policy.

RBI will tomorrow present its fourth bi-monthly monetary policy for the current fiscal amid a clamour by the government as well as the industry for a cut in the interest rate in view of subdued inflation.