USD/INR remains stable as RBI holds policy rate steady for 3rd meeting

India’s Rupee was mostly steady near 23-week low against the US Dollar on Thursday, after the Reserve Bank of India kept its benchmark policy repo rate unchanged at 6.5% for a third meeting in a row in August, in line with market expectations.

The RBI kept its policy stance of “withdrawal of accommodation” to ensure inflation aligns with the central bank’s target of 4%, Governor Shaktikanta Das said.

“The job on inflation is still not done,” the RBI Governor said.

A seasonal surge in food prices pushed India’s headline inflation up to 4.81% in June, following four straight months of cooling. July’s inflation is expected to have accelerated to 6.4%, according to a consensus of analyst estimates.

“We believe the seasonal uptick along with erratic weather conditions will continue to keep the hawkish bias of the MPC intact in the upcoming meetings as well,” Upasana Bhardwaj, chief economist at Kotak Mahindra Bank, was quoted as saying by Reuters.

“However, we expect rates to remain unchanged through the rest of the year.”

The central bank revised up its inflation forecast for the fiscal year 2024 to 5.4% from 5.1%, as expected previously.

Meanwhile, the bank’s economic growth forecast was left without change at 6.5%.

The RBI has delivered a total of 250 basis points of interest rate hikes since May 2022, while bringing borrowing costs to a level not seen since January 2019.

As of 7:24 GMT on Thursday USD/INR was inching down 0.04% to trade at 82.7900. Earlier this week, the exotic Forex pair went up as high as 82.9370. The latter has been the pair’s strongest level since February 27th (82.9450).