Vivek Rajpal of global financial services firm Nomura India has said that he believes that the Reserve Bank of India (RBI) s likely to reduce interest rates as the main concern for the central bank, core inflation has fallen in recent times.

He also pointed out that the RBI now has some headroom for easing the liquidity situation in the economy. Rajpal also believes that the RBI is likely to change forward guidance on rates. Nomura expects RBI to cut the repo rate by 25 basis points and said that it expects a 50 bps in cuts for calendar 2012.

The deputy governor of the Reserve Bank of India (RBI), Mr. Subir Gokarn has said that the central bank has some room for reducing its key policy rates following moderation of core inflation and a fall in global crude oil prices.

The central bank had earlier indicated that its stand on monetary policy will depend on the level of oil prices in the international markets and the domestic economic growth rates. Mr. Gokarn said that the liquidity situation is comfortable in the economy citing a fall in bank’s borrowing from the RBI.