Barclays expects consumer inflation to decline to below the 8 per cent mark if official monsoon forecasts come true.
A good monsoon will boost agricultural output and thus exert downward pressure on food prices, the culprit for fueling high inflationary pressures for the past several months.
The RBI is targeting to bring down consumer inflation to 8 per cent by January 2015. In April 2014, consumer inflation accelerated to 8.59 per cent, giving the RBI little room to press the easing button. The central bank this week maintained status qou on interest rates but slashed the SLR by 50 basis points to inject some liquidity into the Indian banking and financial system and spur credit growth.
The Met Department has said that monsoons will be 95 per cent normal this year.
"For the RBI, the monsoons will be a crucial variable in calibrating monetary policy, as the rains will have implications for both inflation and growth," Barclays said, the PTI reported.
"We expect retail inflation-the RBI's key focus at the moment - to be in a low 7 percent handle, on average, in FY15", Barclays said, the PTI reported