Perplexing silence on falling rupee

Abstract

Averting a steep rupee drop would have been in sync with the RBI's stated intention of curbing exchange rate volatility, fully accepting its sensible policy of not having any specific exchange rate target. Theme sentence if you need one: The RBI has not projected the impact of the rupee’s fall and rise in oil prices on its inflation outlook. (if this is too long you can remove the last phrase ‘on its inflation outlook).

On Friday October 5th, the RBI’s Monetary Policy Committee announced at 2:30 pm its decision to keep the repo rate unchanged, while changing the monetary policy stance from neutral to tightening. A 25basis point repo rate hike to 6.75% was broadly expected by the market and recommended by many analysts and economists. Following this decision, the rupee tanked by about 50 paise to an all-time low of below 74.20 per US dollar, and then recovered to around Rs 73.60 late in the trading day, most likely due to substantial dollar sales. Read more at: https://www.forbesindia.com/article/iim-bangalore/perplexing-silence-on-falling-rupee/51659/1