USD/INR: RBI Unlikely to Cut Rates Ahead of Fed, Supporting the Rupee – Commerzbank

USD/INR remains stable around the 83.00 level, maintaining a range between 82.50 and 83.50 over the past four months. Commerzbank analysts assess the pair’s future direction following India’s latest inflation data.

Encouraging Inflation Trends

January’s headline inflation declined to a three-month low of 5.1% YoY, while core inflation, excluding food and energy, dropped further to 3.6% from the previous 3.9%. These developments are positive indicators, suggesting that the Reserve Bank of India’s (RBI) tight policy stance is effectively curbing inflationary pressures amid strong demand.

The RBI has expressed its desire to see inflation return to around 4%, the mid-point of its 2-6% target range. Therefore, it is anticipated that the RBI will maintain a hawkish stance in the near term. It is unlikely that the central bank will cut rates ahead of the US Federal Reserve. This stance is expected to provide support for the Indian Rupee (INR).

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