The Indian rupee rose today even after the central bank cut its key interest rate, while boosted some other borrowing costs to address imbalances in the domestic economy.
The Reserve Bank of India reduced the marginal standing facility rate by 25 basis points to 8.75 percent. At the same time, the central bank increased the policy repo rate under the liquidity adjustment facility by 25 basis points to 7.75 percent. The RBI said in the statement:
With the reduction of the MSF rate and the increase in the repo rate in this review, the process of re-aligning the interest rate corridor to normal monetary policy operations is now complete.
The bank faces a difficult situation as it should rein inflation without damaging fragile economic growth.
USD/INR fell from 61.5150 to 61.4250 as of 14:23 GMT today.
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