The Indian rupee's crisis deepened further against the American dollar as it sank further on Friday to another new low – this time, crossing the 74-rupee mark to settle at 74.23. The rupee's slump on the day came after the Indian central bank, the Reserve Bank of India (RBI) had its monetary policy committee (MPC) meeting.
Contrary to expectations of the RBI increasing the key rates, the MPC meeting had these rates being left unchanged. As such, the repo rate – the lending rate of the RBI to the other banks in the country – was left untouched at 6.5%.
Speaking about the decision to keep the repo rate intact, the RBI governor, Urjit Patel stated, "Today’s stance of calibrated tightening essentially means that in this rate cycle a rate cut is off the table and that we are not bound to increase rates at every meeting.
As new data comes in we would look into changing our policies accordingly." The RBI's decision raised prompt assessment by strategists who opined that the central bank's decision was made keeping in mind the need to maintain internal economic stability within the country instead of focusing specifically towards the trading losses made by the rupee against the dollar.
DBS Bank's trading head and executive director, Ashish Vaidya shared, as quoted by the Reuters, "The first thing that came to my mind when I saw the decision was that RBI seems to be more confident than the market on the dollar versus the rupee.
It seems like RBI chose financial stability over rupee because there is no strong inflation pressure imminently."