RBI may cut repo rate by 25 base points on June 2: Assocham

The Reserve Bank is likely to slash the benchmark interest rate by 0.25% to stimulate demand, with retail inflation at 4.87% in April, much below the apex bank's target of 6 per cent by January 2016, according to Assocham.

The industry body also estimated that the RBI may cut the benchmark interest rate by another 0.50% in the two quarters post the June 2 monetary policy review.

In a note submitted to RBI Governor Raghuram Rajan, Assocham Secretary General D S Rawat pointed out that the Consumer Price Index (CPI) inflation is expected to be in a range of 4.5-6% over the remainder of 2015.

Based on the RBI's view, the real interest rate should be around 150-200 basis points.

"Thus, we anticipate a 50 bps reduction in the repo rate over the remainder of this calendar year, while 25 bps should be announced right away," Rawat said.

In its previous monetary policy review on April 7, the RBI had kept policy rate unchanged, saying it was assessing the impact of unseasonal rains and hailstorms on food prices, even though it hoped that normal monsoon in the coming months would bring down retail inflation to about 4% by August.

The RBI had also sounded optimistic about meeting the 6% retail inflation target for January 2016.