According to the global financial services major, normal rains are pushing up sowing and river waters would douse agricultural inflation (agflation) going forward.
"We continue to expect the RBI to cut 25 bps on August 9 if good rains push up pulses cropping and dampen pulses price inflation," said the Bank of America-Merrill Lynch report.
"As monetary policy should surely be forward looking, we expect the RBI to factor in the fact that a good monsoon would damp pulses prices," it said, adding that food prices are peaking off.
Monsoon rainfall is running at 100 per cent of normal so far, much better than last year's 86 per cent and sowing has picked up to 103.3 per cent of last year.
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BoA-ML has cut March 2017 CPI inflation estimates to 5.1 per cent from 5.7 per cent on good rains. The June Core CPI inflation has actually slipped to 4.8 per cent with high rates hurting growth and constricting pricing power.
Meanwhile, the wholesale inflation accelerated for the third straight month in June hitting 1.62 per cent on costlier food and manufactured items.
The hardening of the Wholesale Price Index follows an uptick in retail inflation, which hit a 22-month high of 5.77 per cent in June.