Declining rate of inflation will encourage the Reserve Bank of India (RBI) to reduce its key policy rates by 0.75 per cent till December this year as against its earlier estimate of 0.25 per cent, British brokerage firm Barclays predicted.

The rate of inflation has fallen faster over the past few months than many analysts' expectations. As per Barclays' estimates, India's consumer price inflation (CPI) will average less than 9 per cent in FY14, which will be lowest in five years.

The brokerage also slashed the average headline inflation forecast to 5.3 per cent for the FY14, and said that such trends should ease the central bank's concerns over inflation and help it delivering deeper policy rate cuts.

In its latest report, the British brokerage said, "We are now expecting another 0.75 per cent of repo rate cuts over the remainder of 2013 (as against) the 0.25 per cent previously."

However, it also slashed its forecast for the country's economic growth by 20 basis points to 6 per cent for the FY14. The Union Finance Ministry has pegged its estimated growth target at 6.1 per cent to 6.7 per cent for the current financial year.

On May 3, in its annual monetary policy announcement, the central bank had slashed the repo rate by 0.25 per cent.