Search ForexCrunch

According to the analysts at Nordea Markets, the Indian National Rupee (INR) witnessed a sharp drop after the Reserve Bank of India (RBI) kept the key rates on hold today.

Key Quotes:

“To show its commitment of inflation targeting, the RBI kept monetary policy unchanged today. The decision caused a sharp weakening of the INR. We expect the RBI to raise rates only in April next year as inflation again becomes a concern.”

“As we expected, the RBI kept the main policy rate, the repo rate, unchanged at 6.5% today.  It was a surprise to market consensus, which expected a hike by 25bp.”

“The INR was immediately weakened 0.6% against the USD, as the market was disappointed by the lack of support to the bleeding rupee.  We expect the RBI to raise rates by 25bp at its April meeting, as inflation will likely tick higher due to the weak rupee and higher oil prices.”

“The most important reason for the lack of action today is the absence of inflation pressure.  The RBI is committed to a medium-term inflation target of 4%, within a +/- 2% range. In August, CPI inflation fell to 3.7%, the lowest in nearly a year as food prices decelerated.”