USD/INR continues to hold within the 81-83 range since the start of the year. Economists at Commerzbank analyze the Rupee outlook.
India’s tame core inflation
June headline inflation picked up to 4.8% YoY from 4.3% previously, led by higher food prices. This was still well within the Reserve Bank of India’s (RBI) 2-6% inflation target range. It was mainly due to higher food prices which are expected to rise further in the coming months. However, the good news for RBI is that core inflation, which strips out food and energy, remained well-behaved and unchanged at 5.2%.
There are no compelling reasons for RBI to alter its course of action at this juncture. It is adopting a wait-and-see attitude with a slight tilt to the hawkish side.
The strong economic backdrop and stable inflation picture are contributing to a stable INR.
