Currency Perspective- RBI cuts inflation projections on the back of robust monsoon season: Angel Commodities Broking

Mr.Prathamesh Mallya (Chief Analyst- Non-Agri Commodities & Currencies, Angel Commodities Broking): “The Monetary Policy Committee did what the markets were expecting - kept the policy rate unchanged at 6.25 percent. The committee has also changed its stance on the inflation front. Due to the recent fall in inflation rate (2.99 percent for April 2017) which is well below RBI’s 4 percent target levels, the committee has now lowered its inflation projection for the financial year 2017-18. In the first half of 2017-18, consumer prices are expected to rise in range of 2.0-3.5 percent, down from 4.5 percent and thereafter in the range of 3.5 to 4.5 percent, down from 5 percent.

With respect to NPA assets, the MPC committee is of the opinion that the over-leveraged corporate sector and stressed banking sector may delay revival in private investment demand. They also said that the on-going hullabaloo of inflation spike post GST implementation will not happen as the new tax regime is not expected to have any material impact on overall inflation.

The RBI governor is aware of the political uncertainties in the global arena and hence has decided to keep the status quo. Post this event, the Indian Rupee spot has been continuously appreciating and is currently trading at 64.33 levels while writing. In the near-term, the USDINR spot is likely to appreciate even more as uncertainty with respect to Trump’s administration will keep the American currency pressurized in turn favouring the Indian currency.”