New Delhi: The Reserve Bank is expected to cut key interest rate by 0.25 percent in the next week's policy review meet, which will be supportive of growth recovery, says a Morgan Stanley report.
According to the global financial services major, inflation is likely to be sustainably lower at 4.75 percent year-on-year in quarter ended March 2017.
In the upcoming policy review on April 5, the RBI is expected to cut policy rates by 25 bps, the report said adding that 25-50 bps of rate cut is expected in 2016.
"Our economist's out-of-consensus view of policy rate cuts has played out in 2015. He expects inflation to be sustainably lower at 4.75 percent YoY in quarter ended March 2017," Morgan Stanley said in a research note.
According to the report, "monetary policy will be supportive of growth recovery".
As per the brokerage firm's recent investor survey, about 2/3rd of investors expect 50 bps of rate cut in 2016.
The declining inflation and negative industrial outlook have strengthened a case for RBI cutting interest rate in its first bi-monthly monetary policy for 2016-17 on April 5.
RBI Governor Raghuram Rajan on February 2 left the key interest rate unchanged citing inflation risks and growth concerns.
Rajan on March 12 had said the government sticking to fiscal consolidation roadmap of reducing deficit to 3.5 percent of the GDP in 2016-17 was comforting.
On how that would feed into monetary policy, he had said "wait and see".