RBI’s Moves Limited by Record Low Rupee

The slump in the rupee to a record low has narrowed the Reserve Bank of India’s scope to cut interest rates next week for a fourth straight meeting.

Governor Duvvuri Subbarao will keep the repurchase rate at 7.25 percent on June 17, 10 of 18 analysts said in a Bloomberg News survey. The rest called for a reduction to 7 percent. The currency’s about 7 percent drop versus the dollar this quarter, the biggest in Asia, threatens to make imports more expensive.

The rupee reached its weakest level today, weighed down by an unprecedented current-account deficit, the slowest Indian economic expansion in a decade and speculation the dollar will gain if the U.S. scales back monetary stimulus. Subbarao said May 30 that depreciation may stoke inflation and increase the cost of servicing foreign-currency debt.

Bloomberg

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