Inflation, now on the decline, could head further southwards to hover in the range of 4-5 per cent by end-this fiscal, a top economist said today.
"Inflation is expected to decline to around 4-5 per cent by end-this fiscal," the Prime Minister's Economic Advisory Council's Chairman Suresh Tendulkar told reporters on the sidelines of a conference here.
Inflation has dipped to 6.84 per cent for the week ended December 6, the lowest in nine months.
With inflation now not likely to prove a major headache, it is widely expected that the apex bank would effect rate hikes to give a boost to the growth momentum.
"A 1 per cent cut in both the repo and reverse repo rates is desirable," Tendulkar said.
Public sector banks have already begun slashing their prime lending rates while those in the private sector space have so far refrained from doing so.
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"Private sector banks will (now) have to reduce their rates," Tendulkar said.
According to him, presently banks were unwilling to lend though they were well-capitalised.
"Banks are well-capitalised but the current problem is that they are unwilling to lend," he said.