Global forecasting firm Oxford Economics on Monday said the RBI may cut key benchmark policy rate in the fourth quarter of the current calendar year as a mix of factors will allow the central bank to shift focus and adopt a more accommodative policy stance sooner.

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It further said inflation has already begun easing, and consumer inflation expectations are falling, so attention has shifted from estimating the peak level of the current hiking cycle to the timing of rate cuts.

"We are updating our baseline view for India to include a first rate cut by the RBI in Q4 2023. "We think a mix of factors will allow the RBI to shift focus and adopt a more accommodative policy stance sooner," Oxford Economics said.

It noted that despite easing price pressures recently, risks to inflation over the remainder of the year are to the upside.

"The MPC will want to see clear signs that inflation is stabilising in the middle of its target range before considering a dovish move – in our view this will happen before the end of the year," the global forecasting firm said.

While pointing out that high-frequency indicators for India still suggest robust activity, it said, but activity has clearly begun to slow.

"After a resilient first quarter, the global economic slowdown is set to identify and there are significant risks of a long and deep downturn that will transmit from advanced to emerging economies, including India," it said.

The RBI has been tasked to ensure retail inflation remains at 4 per cent (with margin of 2 per cent on either side).

In April, the Reserve Bank in a surprise move hit the pause button and decided to keep the key benchmark policy rate at 6.5 per cent.

Prior to it, the Reserve Bank of India (RBI) was on a rate hiking spree, raising the repo rate by 250 basis points since May 2022.

Last week, RBI Governor Shaktikanta Das had said inflation has moderated, and the next print is expected to be lower than 4.7 per cent though there is no room for complacency and the war on inflation will continue.

Retail inflation fell to an 18-month low of 4.7 per cent in April, mainly due to cooling food prices.

The governor, however, had emphasised that although inflation has moderated, there is no room for complacency.

For the current financial year, he said the RBI has projected a growth rate of 6.5 per cent.