Rupee Slides as RBI Cuts Rates
The Indian rupee weakened to 89.9 per USD after the RBI cut interest rates by 25 basis points to 5.25%. This decision was influenced by low inflation and steady growth, creating a "Goldilocks" scenario. The rupee's decline is due to soft trade flows, capital outflows, and U.S. tariffs. The RBI maintained a neutral stance, suggesting this may be the final rate cut for now.
The Indian rupee weakened to around 89.9 per USD, trading near record lows, after the Reserve Bank cut interest rates at its December meeting.
The central bank lowered the repo rate by 25 basis points to 5.25%, its first move in six months, after inflation hit record lows and growth stayed firm, a combination policymakers described as a “Goldilocks” backdrop that allowed room to support activity.
The rupee has fallen nearly 5% this year, the weakest in Asia, pressured by soft trade flows, capital outflows and steep U.S. tariffs that have strained exports and pushed the currency near the 90-per-dollar mark.
While most economists expected the cut, some thought the RBI would hold after the rupee’s slide, though expectations of upcoming Federal Reserve easing may help preserve the rate gap and temper further losses.
The central bank kept its neutral stance and indicated this could be the final cut for now, with future support likely delivered through liquidity operations.
