RBI flags ‘currency war’ risk to stability

Reserve Bank of India (RBI) Governor Urjit Patel has flagged the risks to macroeconomic stability from a potential ‘currency war’ in the wake of rising global trade tensions and said the central bank’s decision on Wednesday to raise interest rates was aimed at firmly anchoring inflation expectations.

“RBI’s statements on increasing external risks and discussions on currency contagion (currency war) in the press conference, confirms our belief that the RBI is not in favour of excess depreciation and seems to want to hold on to a certain exchange rate level,” Mr. Barua wrote in a note to clients. “A rate hike is a textbook method of defending a currency,” added the HDFC Bank economist, who has not ruled out another rate increase.

Source : https://www.thehindu.com/todays-paper/tp-business/rbi-flags-currency-war-risk-to-stability/article24576827.ece

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