Shocking Twist: Rupee Weakens Despite Falling Inflation & Oil! Will RBI Cut Rates Next?

Economy

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Updated on 13 Nov 2025, 10:41 am

The Indian Rupee experienced a decline for the second straight day, settling at 88.66 against the US dollar, as reported by Bloomberg. This weakening occurred even as the dollar index and crude oil prices trended lower. India's retail inflation saw a dramatic fall, reaching a record low of 0.25% in October, down from 1.44% in September. This sharp decrease was attributed to a favourable base effect, a substantial drop in food prices, and the initial impact of GST rate rationalization. The low inflation figures are expected to provide the Reserve Bank of India’s Monetary Policy Committee with room to contemplate an interest rate cut during its December meeting. Rural inflation even entered a deflationary zone.

Market participants displayed caution, influenced by the impending Bihar election outcome and anticipation of US CPI data, which is expected to impact dollar movements and consequently the rupee's trend. The rupee is predicted to trade within a range of 88.40 to 88.95 in the interim. Meanwhile, the US government shutdown concluded, though key economic reports like October jobs and CPI might be delayed. The dollar index was trading lower.

Impact This development has implications for India's economy. A weakening rupee makes imports more expensive, potentially impacting the cost of goods and corporate margins for companies reliant on imports. Conversely, it makes exports cheaper, benefiting export-oriented businesses. The low inflation provides the RBI a potential window for monetary easing, which could stimulate economic activity but might also put further pressure on the currency if not managed carefully. Impact Rating: 7/10

Definitions: Greenback: A common nickname for the United States dollar. Dollar Index: A measure of the value of the U.S. dollar relative to the currencies of a broad basket of U.S. trading partners. CPI (Consumer Price Index): A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation and food. It is used to measure inflation. Deflationary Zone: A sustained decrease in the general price level of goods and services, indicating falling prices. Monetary Policy Committee (MPC): A committee of the Reserve Bank of India responsible for setting the policy repo rate, which influences inflation and economic growth. GST (Goods and Services Tax): A comprehensive indirect tax levied on the supply of goods and services across India. Favourable Base Effect: When the percentage change in a metric is magnified because the previous period's value was unusually low.