The Reserve Bank of India (RBI) will stick to its exchange rate policy and the guidance provided on monetary policy would hold until further notice, the central bank's deputy governor Subir Gokarn said on Tuesday.
We have repeatedly said that the rupee is now a floating currency within the boundaries of the regime of structural capital controls on debt inflows, Gokarn told reporters at a televised event. There is no intent to intervene with a particular exchange rate target in mind.
The partially convertible rupee has been the worst performing currencies in Asia so far this year, having shed more than 9 percent against the dollar. Gokarn said that the rupee's losses are due to global conditions and capital reallocations around the world have impacted many currencies.
The RBI raised interest rates in late October for the 13th and possibly final time in a tightening cycle that began in early 2010, on expectations that persistently high inflation will finally begin to ease starting in December.
The central bank said it was unlikely to raise rates again in December and may remain on hold subsequently if inflation follows its projected trajectory.
We gave the guidance two weeks ago. If we want to change the guidance we will change the guidance...Unless there is something dramatic that happens to change it, that guidance remains. So let us say, the guidance remains the same until further notice at this stage, Gokarn said.
Government-backed fuel retailers have raised gasoline prices by about 2.7 percent from Friday. The move, aimed at cutting revenue losses of oil firms, is likely to add pressure to stubbornly high inflation in Asia's third-largest economy.
RBI may consider reversing its tight monetary stance as inflationary woes begin to ebb next month, a top policy adviser said on Saturday. The RBI will only consider easing monetary policy if inflation falls below 7 percent, Governor Duvvuri Subbarao had said a day after its policy review on Oct. 25.