The Pound Sterling to Indian Rupee (GBP/INR) exchange rate advanced in the early half of Wednesday’s European trading as India’s Wholesale Price Index (WPI) showed inflation quickened in December—the first rise in five months.
The increase in inflation weighs on optimism that the Reserve Bank of India (RBI) will cut interest rates in the New Year. Inflation has been a massive problem for the Indian economy and the RBI has previously stated that it won’t consider cutting rates until inflation consistently shows signs of retreating.
Economist Arun Singh stated: ‘The probability of any rate cut is very low right now. The bump-up in inflation, though expected, shows how tough the RBI’s job of taking a call on when to reduce rates is going to be.’
The WPI Inflation figure reached 0.11% in December from November’s 0.0%. However, inflation has remained moderate and therefore a surprise cut from the RBI next month can’t be ruled out.
Industry expert Aneesh Srivastava commented: ‘Falls in commodity prices have brought down WPI, CPI (consumer price index) alike. All indicators now point that the RBI should cut rates by at least 25 basis points in its next policy meeting on February 3rd.’
However, some economists suggest that the cautious RBI may be inclined to assess budgets before taking action.
Economist Radhika Rao commented: ‘Given the uncertainties, the RBI might prefer to monitor the content of the end-February’s budget and credibility of fiscal targets before easing rates. This suggests rate cuts might begin April 2015 onwards, with a small probability of inter-meeting cut in March.’
Meanwhile, the UK saw its own inflation figures fall in December from 1.0% to 0.5%. The fall in inflation was a result of tumbling oil prices as the core measure which strips out volatile factors such as black gold increased from 1.2% to 1.3%.
Pound Sterling to Indian Rupee (GBP/INR) Exchange Rate Forecast
The Pound Sterling to Indian Rupee (GBP/INR) exchange rate may feel the effects of India’s Balance of Trade release later in Wednesday’s session.
In what is promising to be a quiet week for UK data, the Pound Sterling will experience movement dependent on any global developments as well as any political advances in the UK.
The Pound Sterling to Indian Rupee (GBP/INR) exchange rate is trending in the region of 94.3150.
