The December Reverse Bank of India (RBI) meeting proved to be a let-down for the Indian rupee. However, economists at HSBC expect the INR to recover gradually over time amid improving balance of payments.

The December RBI meeting somewhat disappointed INR

“The INR was slightly weaker following the RBI’s decision to keep its policy rates unchanged against some expectations of a 20bp hike in the reverse repo rate.” 

“The RBI held on to its accommodative stance for ‘as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of COVID-19 on the economy’. Yet, this need not hold back the INR from gradually recovering over time, amid supportive trends from India’s balance of payments.”