Financial services majors like HSBC, DBS, Bank of America Merrill Lynch (BofA-ML) and State Bank of India expect RBI to go for a 25 basis points rate cut during its policy review meet later this month.
Retail as well as wholesale price based inflation dived to new lows in August on falling global commodity prices.
Consumer Price Index based inflation, which RBI considers as benchmark, eased to 3.66 percent in August from 3.69 percent the previous month, while the one based on Wholesale Price Index tumbled for the 10th straight month to (-)4.95 percent compared with a provisional (-)4.05 percent in July.
"These weak inflation numbers give RBI the elbow room to lower rates by 25 bps this month," DBS said in a note.
According to HSBC, RBI would certainly carry its share of concerns about weaker than expected monsoon rains, but the central bank will take comfort from the fact that potential counteracting forces exist.
"In sequential annualized terms, both headline and core inflation are running below the RBI's January 2016 target of 6 percent, which should give the RBI enough confidence to cut the policy rate by a further 25 bps on September 29," HSBC said.
Experts however said that the only thing that could potentially hold back the RBI is a disruptive reaction to US Fed's FOMC meet. The Federal Open Market Committee (FOMC) meeting, is scheduled on September 16-17.


Latest News  from Business News Desk