The Indian rupee is performing lackluster ahead of the monetary policy from the Reserve Bank of India (RBI) on Friday. The RBI is likely to ignore the alarming inflation and will keep the benchmark rates unchanged considering a pause in the growth rates. Economists at Commerzbank expect the INR receive a tailwind from the pullback in oil prices.

RBI to emphasize downside risks to growth to justify continued accommodative stance

“RBI is expected to leave rates unchanged at 4%. They are likely to emphasize the downside risks to growth to justify a continued accommodative stance. They can’t ignore the inflation risks but will note that inflation is due to cost-push rather than demand-pull factors. As such, they may need to rely on other tools. One of which could be to ensure a relatively stable INR or at least mitigate INR’s weakness in order not to exacerbate import inflation.”

“USD/INR has eased back from the high of 77.00 last month and the pullback in oil prices could provide a further reprieve for INR.”

See – RBI Preview: Forecasts from eight major banks, CPI forecast revision and guidance watched