INR: Rupee Firms as Feb CPI Allows RBI to Keep Policy Focus on Growth

The rupee strengthened 0.24% against the dollar during Thursday’s session, outperforming the rest of the Asia FX basket following the lower-than-expected inflation print for February yesterday. The data clears the way for another rate cut at the April MPC after last month’s cut highlighted the RBI’s conclusive shift in policy focus towards reviving growth.

• Meanwhile, broader greenback weakness continues to support the local currency, while Reuters also note, citing traders, that trading volumes were thinner today due to a technical outage on the LSEG’s foreign exchange trading platform in India.
• Data yesterday showed inflation slipped to +3.61% Y/Y, below the 4% mid-point of the RBI’s target range and undershooting the central bank’s quarterly projection, with an ongoing moderation in food prices providing the main drag to the headline figure. The data looks set to pave the way for another rate cut at the April 9 meeting, while some sell-side analysts say a change of stance may also be considered.
• JP Morgan say the data reinforces their call for a 25bp rate cut in April, while ANZ believe the MPC can pursue a bolder monetary policy by delivering at least two more rate cuts of 25bp each in April and June. DBS say a change in stance to ‘accommodative’ will not surprise them.