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Jun 14, 2012, 11.15 AM IST
DBS says a 25 basis points cut in the repo rate is "all but certain", while the chances of a 50 bps cut would increase if WPI inflation comes in below expectations.
"Inflation will have to overshoot considerably (such as above 8%) to cause any rethink," DBS said referring to the case for a 25 bps rate cut. DBS expects WPI to be 7.4%, while sees core inflation at 5%. However, aggressive rate cuts to spur growth could backfire, as they may raise inflation beyond comfort levels and increase depreciation pressures on the rupee, they write.
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