The Reserve Bank of India (RBI) cut interest rate by 25 basis points to 5.25%, supporting economic growth amid benign inflation outlook. The USD/INR pair is hovering just below its record highs, as markets set the floor for interest rates, with a possible rise in the future over the next two years, BBH FX analysts reported.
Reserve Bank of India cuts interest rate to 5.25% amid benign inflation
“USD/INR rose again to 90.0000, just below yesterday’s high of 90.4248. The Reserve Bank of India (RBI) met expectations and cut interest rates by 25 basis points to 5.25%. The RBI’s Monetary Policy Committee unanimously backed the cut, noting that ‘the benign inflation outlook continues to provide policy space to support growth momentum.’
“The swaps curve shows that the interest rate has bottomed out at 5.25%, with interest rates rising over the next two years. The risk is that the RBI will pull back again which is a headwind for the Indian rupee. India’s core inflation, excluding gold, is close to the RBI’s lower target range of 2%-6%, and tariff-related developments are likely to slow growth in the coming quarters.
