In a surprise decision, the Reserve Bank of India (RBI) kept its repo rate unchanged at 6.50%. Economists at TD Securities continue to be biased towards further INR gains, with a firm cap on USD/INR around 83.00.

RBI will begin to ease by end-2023

“RBI kept its repo rate unchanged at 6.50% in a unanimous decision. RBI also maintained its ‘withdrawal of accommodation stance’. RBI also lowered its forecasts for CPI inflation slightly to 5.2% in fiscal year 2024 from 5.3% and raised its FY 24 growth forecast to 6.5% from 6.4%.”

“We now think that 6.50% marks the terminal rate for the Bank. We maintain our view that the RBI will begin to ease by end-2023, but we may need to push back easing expectations.”

“We continue to be biased towards further INR gains, with a firm cap on USD/INR around 83.00 in place and a likely move towards the 200-Day Moving Average around 81.24.”