The Indian rupee experienced a decline, nearing 87.7 per USD, hovering close to its record low of 88.1 observed on August 5th. This depreciation followed the United States' decision to double its tariffs on Indian goods. U.S. President Trump announced an increase to a 25% tariff on Indian imports, raising the total tariff burden to 50%. This action was in response to India's ongoing purchase and re-exportation of Russian oil and energy, despite criticism. Prime Minister Modi countered by asserting that Indian companies prioritize securing the most advantageous inputs amid a volatile economic landscape. The newly imposed tariffs, doubling last week's 25% rate, adversely affect the forecast for foreign exchange inflows into the world's fastest-growing major economy.
In terms of economic policy, consumer inflation in India fell to a six-year low of 2.1%, well below analysts' expectations, challenging the lower threshold of the Reserve Bank of India's (RBI) inflation target range of 2%. As anticipated, the central bank maintained interest rates during its August meeting. However, a significant portion of market participants are anticipating an additional rate cut before the end of the year.
