RBI may go for sixth repo rate cut this year despite rise in inflation: Report

New Delhi | Jagran Business Desk: The Reserve Bank of India (RBI) is likely to go ahead and cut interest rates for the sixth time this year despite a spike in inflation, news agency PTI quoted analysts as saying. Meanwhile, some analysts wondered if the economy was heading towards "stagflation" -- which is characterised by high unemployment and stagnant demand.

An official data released on Monday showed consumer price inflation in September rose by 0.69 per cent to 3.99 per cent from 3.3 per cent in August. As per PTI, the central bank is bound the keep the price index at 4 per cent under the inflation targeting framework.

The Analysts believe that the sharp spike is due to a rise in food prices, particularly onion prices that jumped 0.43 per cent.

Foreign brokerage firm Merrill Lynch economists even expect that consumer price inflation to move up to 4.6 per cent in October. But despite this fact, RBI may cut interest rate by 0.25 per cent. It said last year's liquidity crunch is still hurting the economy with industrial numbers contracting by 1.1 per cent-- steepest in the last seven years.

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Meanwhile, Japanese brokerage firm Nomura warned of weaker than expected growth and higher inflation rate. It said the Monetary Policy Committee (MPC) is likely to cut interest rate by 0.15 per cent in December.

The RBI has so far cut interest rate by 1.35 per cent to 5.4 per cent with five rate cuts in 2019 to revive growth amid slowdown created by softer inflation and falling growth numbers. It last cut repo rate by 25 bp on October 4 and revised its GDP forecast from 6.9 per cent to 6.1 per cent.

Earlier the world's most powerful central bank, US Fed slashed its interest by 0.25 bp for the second time in 2019.

Besides the finance ministry has been taking several steps to boost the economy. It includes lowering corporate tax, megabank merger and easing FDI norms, among others.