RBI acts to anchor rupee depreciation expectation, Das says

THE Reserve Bank of India (RBI) is in the currency market almost everyday with the twin objective of curbing volatility and anchoring expectations for rupee depreciation, the central bank’s governor Shaktikanta Das said.

“Exchange rate stability is an intrinsic element of our overall macroeconomic and financial stability,” Das said on Monday (Sep 5) speaking at the annual event in Mumbai.

“Our endeavour, amidst the extraordinary events unfolding globally on an ongoing basis, has been to anchor expectations and allow the exchange rate to reflect the fundamentals rather than overshoot,” he said.

The Indian rupee has fallen about 7 per cent this year and stayed around the middle of the pack among emerging market Asian peers.

The central bank has drawn down its forex reserves to limit the scale of the rupee’s depreciation even as it set multiple fresh record lows in recent weeks amid a strong dollar. The rupee has hovered close to around 80 per dollar for most of the last 2 months, setting a record at 80.1288 last week.

Easing inflation

Das said the central bank expects inflation to moderate in the second half of the financial year ending in March 2023.

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“While the incoming monthly inflation prints in the near-term could be bumpy, we expect it to moderate in the second half of 2022-23, and then move within the tolerance band in Q4 and then even lower in Q1 of 2023-24,” Das said.

Consumer price gains have eased in the last 3 months on a slump in global commodity prices, but have stayed above the central bank’s 6 per cent target ceiling. RBI has raised the benchmark policy rate by 140 basis points in 3 adjustments since May to tame prices and is scheduled to hold its next rate review on Sep 30. BLOOMBERG