The Indian rupee weakened today ahead of tomorrow’s monetary policy decision as the central bank mentioned that there is need for some measures to spur growth. Analysts interpreted such comments as a hint at future interest rate cuts.
The Reserve Bank of India wrote today:
As macro-risks from inflation and twin deficits recede further, that could yield space down the line for monetary policy to respond more effectively to growth concerns.
The bank also mentioned that “global growth projections, including that for India, are getting revised downwards”, but also said that “the near-term inflation risks are on the upside”. The central bank needs to boost growth, but remains cautious of spurring inflation further, therefore it is hard to predict tomorrow’s decision. Whatever the RBI will decide, traders preferred not to risk and were selling the rupee.
USD/INR went up from 53.5750 to 54.0750 as of 13:52 GMT today.
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