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Announcing the RBI’s latest Monetary Policy Committee (MPC) decisions, Malhotra emphasised that the central bank intervenes only to curb excessive and disruptive volatility.
The rate the rupee settles at is a function of demand and supply, the RBI guv stated. “We should not be looking at day-to-day volatility but taking a more long-term view. Day-to-day movements may not be all that important,” he said. “The rupee was certainly factored in while deciding on rate cut and stance. A depreciating rupee certainly puts pressure on inflation,” he added.
His statement comes as the rupee continues to breach new lows.
On Friday, the Indian currency recovered 16 paise from its all-time low closing level, trading at 87.43 against the US dollar.
The Indian currency breached the 87 mark against the US dollar for the first time on February 3, 2025, and has since hit a series of lows.
The rupee touched a record low of 87.60 against the greenback on Thursday, February 6, before settling at a record closing low of 87.58.
To maintain liquidity, the RBI, in January, resumed daily variable rate repos, a mechanism discontinued under former governor Urjit Patel in favour of a 14-day liquidity cycle requiring banks to forecast their needs in advance.
Additionally, the central bank has been actively intervening in the forex market via FX swaps, stressing its proactive approach—a trend seen under former governor Shaktikanta Das.
Alongside its efforts to stabilise the rupee, the RBI announced a 25-basis-point rate cut on Friday, marking the first rate reduction in 12 policy meetings. The repo rate now stands at 6.25%, down from 6.5%.
Catch RBI policy updates here
(Edited by : Anshul)
First Published: Feb 7, 2025 12:05 PM IST
