Why RBI is going after the rupee
India’s central bank has announced an interest rate cut, targeting the rupees, in a bid to revive the economy.
The decision, which the RBI announced on Wednesday, comes amid growing signs of rupee weakness in the wake of Prime Minister Narendra Modi’s unexpected defeat in the 2019 general elections.
The RBI said in a statement it will lower the key repo rate, which stands at 2.5% to 5% from its previous rate of 7.25% and the repo rate will remain at that level until December 31.
The RBI will now wait for the central bank’s review of the impact of the lower repo rate on the economy, the statement said.
The central bank is also expected to review the impact on inflation, inflation expectations, foreign exchange rates, foreign direct investment, and the foreign exchange reserves.