#RBI To Cut Rates By Another 0.5% In 2016-17: Morgan Stanley

New Delhi: The Reserve Bank of India is expected to keep key rates unchanged in the next policy meeting on June 7, but might lower rates by another 50 basis points (bps), or 0.5 per cent, during the current financial year, according to a report by Morgan Stanley.

Retail inflation is likely to moderate going forward and is expected to decelerate to 4.5 per cent by March 2017, the report said.

“Based on our CPI forecast and RBI’s stated real rate target of 1.5-2 per cent, we expect RBI to lower rates by another 50 bps in FY2017,” Morgan Stanley said in a research note.

Retail inflation soared to 5.39 per cent in April on higher food prices, reversing a downward trend seen in recent months.

In terms of pace of rate cuts, the global brokerage firm expects the Reserve Bank of India to wait for the onset of monsoon to see the trend in actual inflation, and hence expects the RBI to keep rates unchanged in the next policy meeting on June 7.