The RBI had kept its key rates unchanged in the December 2 policy. The repo rate and the cash reverse ratio were retained at 8 percent and 4 percent, respectively.
"We have grown more confident of our standing call for a 25 bps repo rate cut on February 3 after November non-food CPI inflation dropped to 5.1 percent, far below the long-run average of 7.2 percent since 1997, and the wholesale price index hit 0 percent," the foreign brokerage firm said in a statement here.
The US brokerage added it expects inflation to be in line with RBI's estimates of 6 percent in January 2016.
With the industrial production contracting 4.2 percent in October, BofA-ML said the RBI might be tempted to cut the lending rate to ensure recovery in the manufacturing sector.
"Industrial production contracted in October. While this partly reflected data bunching issues, it also reinforces our view that recovery will need lending rate cuts. September quarter GDP growth slowed to 5.3 percent from June quarter's 5.7 percent despite better-than-expected agricultural growth," it said.
With the oil prices currently trending below USD 65/bbl, the brokerage said the softer oil rates would ensure a 0.75 percent rate cut in 2015.

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