In the next fiscal Crisil Research expects average WPI inflation to moderate to 7.0% from 7.7% forecast for the current financial year.
Easing of inflationary pressures is premised on the expectation of higher agricultural output (assuming normal monsoons), a stronger rupee and lower international crude oil prices.
Moreover, demand side pressure is expected to remain weak due to lagged impact of a sharp slowdown in GDP growth this fiscal year, the report said.
In view of a sustained moderation in core inflation over the last four months and anticipation of a lower core going ahead, Crisil Research expects the RBI to cut policy rates by 25 bps in its monetary policy review on 29 January.