Rating agency ICRA has said that concerns on inflation are ebbing and the Reserve Bank should slash the key rates at the forthcoming policy meet for better transmission of its moves by lenders, media reported.
Commenting on the issue, ICRA Managing Director Naresh Takkar told the media, "Consumer price inflation seems likely to undershoot the central bank's projection of 6 per cent in January next, brightening the prospects of a repo rate cut of 0.25 per cent during the ongoing quarter, provided that food prices remain in check."
"An early cut may be warranted as tighter liquidity conditions after the onset of the busy season would impede the process of transmission to bank lending rates," he added.
The rating agency further said that the systemic liquidity is likely to tighten after the onset of the busy season for credit offtake in the third quarter. A decision to cut rates by the RBI in the August 4 policy meet may support a quicker transmission of monetary easing to bank lending rates.