RBI likely to go for rate cut in 2012 Q2 : Nomura

RBI likely to go for rate cut in 2012 Q2 : Nomura

New Delhi: Inflation in India is likely to moderate as per the Reserve Bank’s projection while the growth is expected to fall, prompting the apex bank to start interest rate cuts from the second quarter of 2012, global credit rating and research firm Nomura has said.

“We share the view on the near-term inflation trajectory with the RBI and believe that the rate-hiking cycle is over," Nomura said in its latest issue of ‘Asia Economic Alert´.

“We expect the RBI to start cutting policy rates in Q-2 2012, as growth is likely to deteriorate in the next few quarters," Nomura said.

In its mid-quarterly economic review earlier this month, RBI hinted at rate cuts in future. It had increased rates 13 times since March 2010 to tame inflation.

The central bank kept its key policy rates unchanged during the last review. It retained its year-end inflation projection at 7%, while stating that it will make a formal assessment of its inflation projections for 2011-12 in the third quarter review in January.

“From this point on, monetary policy actions are likely to reverse the cycle, responding to the risks to growth," RBI had said.

The central bank also said that deceleration in growth is contributing to a decline in inflation momentum, helped by softening food prices.

Economic growth in the July-September quarter slumped to a 6.9% - lowest in over two years, as against 8.8% in the same quarter of the 2010-11 fiscal.

Besides, industrial production entered the negative zone in October and contracted by 5.1%.

RBI had also said that there is a downside risk to its projection of 7.6% growth for 2011-12 on account of the global slowdown and domestic issues.