Reserve Bank of India to remain on-hold amid stagflation – Nomura

Analysts at Nomura offer their expectations from the Reserve Bank of India (RBI) in the coming months, in light of India’s rising inflation and economic slowdown.

Key Quotes:

“Expect India headline inflation to remain at similarly elevated levels in January, but stagflation will be temporary.

RBI will continue to stay on hold during this period of stagflation.

To remain accommodative in Feb, continue to expect 25 bps rate cut in April-June.”

FX Implications: 

Having witnessed sharp declines over the past week, USD/INR keeps its range near five-week lows of 70.710 despite the recovery in the US dollar across the board.

The Indian rupee seems to track the gains in the Chinese Yuan after the Chinese currency jumped on reports that the USTR removed the currency manipulator label for China in its latest report while markets eagerly await the US-China phase one trade deal signing on Wednesday.