New Delhi, June 5: A report released by SBI Research on Friday indicates that decisions made by the Reserve Bank of India’s Monetary Policy Committee (RBI-MPC) could result in a capital inflow of up to $40 billion into the country. This influx may push the Indian Rupee to levels between 92 and 93 against the US Dollar.
The report also suggests that the central bank may keep interest rates steady in its upcoming monetary policy meeting in August.
SBI Research stated, “We believe that the RBI will continue to analyze inflation data before considering any potential interest rate hikes. Contrary to market expectations, growth factors may sidestep an aggressive cycle of rate increases. We anticipate no changes to policy rates in August.”
The report noted that the MPC unanimously decided to maintain the repo rate at 5.25 percent while adjusting growth forecasts down by 30 basis points to 6.6 percent. Additionally, the CPI inflation estimate has been revised down by 50 basis points to 5.1 percent.
Furthermore, the report emphasized, “Based on thorough analysis, we feel that the language of monetary policy has focused on monitoring inflation and safeguarding against external factors, although the policy stance remains neutral. This is a prudent step as it signals calm and confidence from the RBI, preventing pessimistic sentiments that could lead to speculation against the Rupee.”
SBI Research highlighted that the RBI has once again stressed in its policy statement that sometimes the movement of the Rupee does not align with fundamental factors.
The report concluded, “This puts an end to recent unnecessary claims that the Rupee should be allowed to rise to 100, as such assertions promote speculation against the currency.”
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