Indian Central Bank Plans to Stop Rate Hikes, Rupee Isn’t Bothered

The Indian rupee rose today despite the speculation that the slowing economic growth will cause India’s central bank to pause its interest rate hikes.
The government report showed that India’s gross domestic product grew 6.9 percent in the third quarter of this year, demonstrating the slowest rate of growth since the second quarter of 2009. The inflation was above 9 percent in October for the 11th month in a row, being almost two times above the inflation in China.
The slower economic growth should ease the inflation pressure and that, in turn, can decrease the need for the central bank to raise its lending rates. The Reserve Bank of India stated that the probability of interest rate hike at the meeting on December 16 is “relatively low”. Economists speculate that the bank may still be forced to raise the borrowing costs in case the nation’s currency would weaken.
For now, the rupee prefers to go higher, but the situation may quickly change in case the positive mood on markets would wane.
USD/INR fell from 52.2113 to 51.7850, while EUR/INR dropped from 70.203 to 69.6638 today as of 4:12 GMT.

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