Care Ratings expect 25 bps cut in repo rate by RBI

In an analyst note, Care Ratings said it expects Reserve Bank of India (RBI) to reduce repo rate by 0.25 per cent at the mid-term monetary policy review on June 17.

In its May policy review, RBI cut the repo rate by 0.25 per cent and maintained that scope to further slash the short-term rate is limited.

However, the rating agency expects further cut in policy rate by RBI as the WPI (wholesale price index) headline inflation has fallen below 5 per cent and this may prompt the central bank to focus more on supporting economic growth.

There is a higher likelihood of the RBI reducing interest rates by another 0.25 per cent in the June review. The note, written after the release of official data pointing to growth declining to 5 per cent for 2012-13, however, said the central bank would opt for a status quo in case the headline inflation and the current account deficit (CAD) figures go beyond its comfort zone.

Earlier, RBI Governor D Subbarao had said the central bank would consider the slowdown in economic growth while carrying out its review.