Continued strong economic momentum contributing to a relatively stable INR – Commerzbank

Data continue to point to strong economic momentum in India. Economists at Commerzbank discuss INR outlook.

No urgency for another hike

Headline inflation has moderated in recent months to around 4% in May. This was helped by lower food and energy prices. It is back to the middle of RBI’s 2-6% inflation target. It provides scope for RBI to stay on hold for the foreseeable future. 

There’s no urgency for another hike. Nevertheless, RBI would need to stay vigilant on a potential reversal in food prices. It would need to keep a close eye on the upcoming monsoon season and the underlying cost pressures. 

The strong growth picture, stable inflation, and net equity inflows are all contributing to a relatively stable INR. 

USD/INR continues to hold within the 81-83 range since the start of the year.