USD/INR: RBI expected to keep rates unchanged with inflation remaining moderate – Commerzbank

Commerzbank’s Outlook on RBI Policy and Indian Economy

Charlie Lay and Moses Lim from Commerzbank anticipate that the Reserve Bank of India (RBI) will maintain its policy repo rate at 5.25%, as inflation remains well within the central bank’s 2–6% target range and economic growth continues to exceed 7.4%. They note that real interest rates are still above neutral levels, and suggest that a rate reduction is unlikely before 2026, depending on the stability of the Indian rupee. In the short term, they expect the USD/INR exchange rate to stabilize between 89 and 91.

RBI Maintains Steady Policy Amid Controlled Inflation

The RBI is projected to keep its policy rate unchanged at 5.25% in the near future, as inflation remains subdued. Currently, inflation sits at the lower end of the central bank’s target range, and is forecasted to approach 4% in the latter half of the year. The RBI estimates inflation at just 2.1% for the present fiscal year, with updated forecasts to be released soon based on revised data.

Looking ahead, inflation is expected to stay moderate, hovering around 4% in the next fiscal period.

Monetary Policy Decisions and Future Rate Prospects

Earlier this year, the RBI unanimously decided to keep the policy repo rate steady at 5.25%. With inflation under control, robust economic growth, and ongoing uncertainties in global trade, the central bank is likely to maintain its current stance for the foreseeable future, reserving policy changes for unexpected developments. For now, interest rates are expected to remain on hold.

While a rate cut could be considered in 2026, any such move will depend on the rupee’s performance, as the RBI aims to avoid adding pressure to the currency.

Currency Outlook

In the near term, the USD-INR exchange rate is expected to consolidate within the 89–91 range. So far this year, the rupee has depreciated by 1.2% against the US dollar, following a 4.8% decline in 2025.

This article was generated with the assistance of artificial intelligence and subsequently reviewed by an editor.