RBI to cut rates as inflation falls: Analysts

With economic slack likely to increase and the continued easing of global commodity prices, we expect inflation to drop below 4.5 per cent by March 2009, much lower than the central bank’s target of 7.0 per cent, Sonal Varma at Nomura said.

Nomura sees the central bank cut banks’ cash reserve requirements by 100 basis points, repo rate by 150 basis points, and reverse-repo rate by 100 basis points by mid-2009.

Morgan Stanley expects the central bank to announce additional measures, if necessary, to prevent the domestic banking sector, fixed-income mutual funds and non-banking financial companies from suffering any major disruptions.