Fed rate cut boosts sentiment, yet India’s policy and rupee to stay domestically driven
Depreciation pressures on the rupee have increased in recent weeks, too, but the RBI’s response has been different. The Monetary Policy Committee reduced the repo rate last week in line with its inflation mandate, while raising its growth forecast. Improved external fundamentals, including manageable external financing requirements, sufficient foreign exchange reserves, and greater exchange rate flexibility, have enabled domestic policy to focus on local growth and inflation. This offers a degree of decoupling from the US monetary policy cycle, unlike in 2013.
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