RBI reduced the repo rate by 0.25 per cent to 6 per cent earlier this month, citing reduction in inflation risk. The rate cut was the first in 10 months and brought policy rates to near 7-year low.
According to the Japanese financial services major, the MPC minutes suggest low inflation and growth concerns led to policy easing earlier this month, and going ahead the RBI is expected to stay on hold.
Of the 6 members of MPC headed by Patel, four favoured a 25 bps rate reduction, Ravindra Dholakia voted for a 50 bps reduction while Michael Debabrata Patra voted for status quo.
The note comes two days after data showed that headline consumer price inflation (CPI) almost doubled to 2.36 per cent for July from 1.54 per cent in the previous month, and a day after the wholesale price inflation also shot up to 1.54 per cent from being negative in the previous month.
According to the global financial services major, both CPI and WPI inflation have troughed in June and are expected to rise further in the coming months.
The fall in food inflation has been brought about by a disinflation in the prices of mainly pulses and vegetables. The rate of decline in food prices, however, is seen stabilising
The Consumer Price Index (CPI) inflation came in at 2.36 percent for the month of July, as against a market estimate of around 2 percent.
"Given the trend and outlook for inflation, we see clear space for a more accommodative stance in the monetary policy. This is all the more important given the state of industrial sector where growth is anaemic.
The consumer price index, the main policy target of the Reserve Bank of India (RBI), likely rose 1.87 percent in July from a year earlier, according to a Reuters poll of economists, compared with an increase of 1.54 percent in June.
The consumer price index likely rose 1.87 percent last month, after dipping to an historic low of 1.54 percent in June, according to the median forecast of nearly 30 economists.
The producer price index (PPI) rose 5.5 percent last month from a year earlier, unchanged from June, the National Bureau of Statistics (NBS) said on Wednesday.
Former BOJ Deputy Governor Kazumasa Iwata criticised the central bank's price forecasts as too optimistic and warned that even hitting 1 percent inflation could be challenging given a recent batch of weak price data.
"The current level of the policy rate is likely to remain appropriate over the near term," Bullard said in slides prepared ahead of a speech to the America's Cotton Marketing Cooperatives 2017 Conference in Nashville, Tennessee.
It took nearly two years for the Indian rupee to finally break the psychological 64 level. The rupee has been one of the strongest currencies in the world in 2017.
The six-member panel, constituted in September 2016, has three persons appointed by the central government while the rest, including the Governor, are from the RBI.
Forty of 56 economists polled by Reuters predicted the RBI will cut its repo rate by 25 basis points to 6.00 percent - the lowest since November 2010 - as a slump in food prices sent June consumer inflation to a more than five-year low of 1.54 percent.
Growth appears to be a niggling worry, as borne out by recent industrial production, as well as core sector data.
The meeting's outcome is being keenly awaited by all stakeholders including industry and stock markets.
Standing next to sacks of "pigeon peas" in Latur, an agricultural hub about eight hours from Mumbai by train, Somwanshi cuts a narrow slit in one and scoops out a handful of the red-coloured lentils.
Encouraged by significant price improvement, bankers expect RBI, which has kept rates on hold at 6.25 per cent for the fourth straight time citing risk to inflation, to change its monetary stance and may even go for an aggressive rate cut.
Morgan Stanley Research has revised the headline CPI forecast for calender year 2017 to 3.1 per cent from 3.6 per cent earlier and for 2018 to 4.3 per cent from 4.6 per cent earlier.
According to the global financial services major, inflation in India has fallen dramatically, and though the excessively low level it witnessed this fiscal is not sustainable, the rebound may not be too sharp either.
According to the Japanese financial services major, although inflation has bottomed, in the medium term it is expected to see a significant uptrend and rise above the RBI's target.
One striking conclusion from surveys covering more than 40 economies is the rift opening between what most top central banks target -- inflation -- and policy bias, prompting many economists to warn about the rising danger of policy error.
In a widely expected move, the BOJ maintained the 0.1 percent interest it charges on a portion of excess reserves that financial institutions park at the central bank.