The Reserve Bank of India (RBI) has made a surprising decision to maintain its repo rate at 6.50%. Despite this, TD Securities economists remain biased towards INR gains and expect a firm cap on USD/INR at 83.00. However, it is expected that the RBI will begin easing by the end of 2023. In a unanimous decision, the RBI has also maintained its ‘withdrawal of accommodation stance’. Furthermore, the RBI has slightly lowered its CPI inflation forecast for fiscal year 2024 to 5.2% and raised its FY 24 growth forecast to 6.5% from 6.4%.
Our current assessment indicates that the Bank’s terminal rate is now at 6.50%. However, we maintain our prediction that the RBI will start easing by the end of 2023. Nevertheless, we may need to delay our expectation for easing. Additionally, we remain favorably biased towards further INR gains, with an established cap of USD/INR around 83.00 and a probable shift towards the 200-Day Moving Average at approximately 81.24.Our current assessment indicates that the Bank’s terminal rate is now at 6.50%. However, we maintain our prediction that the RBI will start easing by the end of 2023. Nevertheless, we may need to delay our expectation for easing. Additionally, we remain favorably biased towards further INR gains, with an established cap of USD/INR around 83.00 and a probable shift towards the 200-Day Moving Average at approximately 81.24.
