Goldman Sachs expects RBI to cut rates by 25 bps

MUMBAI Mon Dec 17, 2012 4:23pm IST

The Reserve Bank of India (RBI) logo is pictured outside its head office in Mumbai November 2, 2010. REUTERS/Danish Siddiqui/Files

The Reserve Bank of India (RBI) logo is pictured outside its head office in Mumbai November 2, 2010.

Credit: Reuters/Danish Siddiqui/Files

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MUMBAI (Reuters) - Goldman Sachs expects the Reserve Bank of India (RBI) to cut its key interest rate by 25 basis points at its policy review on Tuesday after last week's inflation data came well below expectations, and as economic growth remains sluggish.

The investment bank expects another 25 basis point cut in the repo rate in January, according to an email sent to clients on Monday. Goldman had previously forecast the RBI would cut interest rates by 50 basis points in March.

"With both growth and inflation surprising on the downside relative to the RBI's forecast, there is a reason for the central bank to move earlier than its previous guidance," economist Tushar Poddar wrote in the note.

Data on Friday showed the wholesale price index rose 7.24 percent from a year earlier in November, below expectations for a rise of 7.6 percent. Core inflation was 4.5 percent.

The country's economy grew 5.3 percent from a year earlier in the July-September period.

A majority of analysts polled by Reuters expects the RBI to keep the repo rate on hold, with respondents split about whether it will cut the cash reserve ratio for banks.

(Reporting by Shamik Paul; Editing by G.Ram Mohan)

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