RBI WILL BE CONTENT WITH THE RELATIVE STABILITY IN USD/INR – COMMERZBANK
USD/INR has hovered at the upper end of the 81-83 range for the past month. Economists at Commerzbank analyze Rupee’s outlook after softer inflation in India.
Good news on the latest inflation report for August
Headline inflation moderated to 6.8% YoY after spiking to 7.4% in July. It was driven by softer food prices, which constitute 46% of the CPI basket. They remained high at 9.2% YoY but softer than 10.6% in July.
On an encouraging note, core inflation, which strips out food and energy, eased for the second straight month to 4.8% from 5% in July. This was despite strong domestic demand conditions and reports of rising cost pressures.
Currently, the RBI is in a wait-and-see mode. The next RBI meeting is on 6 October and they are expected to leave rates unchanged at 6.50% for the rest of the year.
There are no clear-cut drivers and RBI will be content with the relative stability in USD/INR.
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