Moody’s expects RBI rate cut amid falling prices

The Reserve Bank of India (RBI) is likely to cut interest rate as the wholesale price-based inflation is expected to decline further to 4.3 per cent in August, Moody's Analytics said on Friday.

''India's wholesale prices likely fell 4.3 per cent on year-on-year in August, a further decrease from last month's surprise 4.1 per cent decline. Energy and manufactured-good costs are expected to continue their decline, while food prices will likely fall steeply as a result of base effects,'' it said.

At the same time, retail inflation also slipped to a record low of 3.78 per cent in July.

It further said, ''The RBI paused its monetary easing cycle, but we expect there will be further cuts in 2015 as inflation continues to fall.''

The central bank mostly tracks the consumer price inflation for its policy decisions and its bi-monthly monetary policy review is due on 29 September.

Indian business has been pitching for a rate cut by the RBI to spur growth and investment.

In a recent meeting with Prime Minister Narendra Modi industry made a pitch for cut in interest rate by RBI citing record low inflation. The government too is in favour of interest cut as inflation is low.

Finance minister Arun Jaitley had expressed the hope that RBI would consider factors like low inflation and commodity prices.

In a scenario where inflation is under control, the quantum of interest rate cut is ''the prerogative of the RBI'', the minister had said.