GBP/INR continues the bearish stance ahead of the Bank of England’s (BoE) interest rate decision. Currently, one British pound buys 95.502 Indian rupees, down 0.27% as of 6:15 AM UTC.
Britain’s central bank is scheduled to release its interest rate decision and the updated size of its quantitative easing programme in a few hours. Most economists expect the BoE to increase its stimulus for the economy amid signs that the recovery is slower than previously thought.
The volume of bond purchases will likely increase by a further 100 billion pounds, bringing the total stimulus to 745 billion pounds.
Previously, there were talks about radical policies, like negative interest rates. However, most policymakers said that such a move was risky for now. Still, investors are looking for hints whether negative rates are a plausible scenario. For the European Central Bank, this kind of tool is controversial. As of now, only one in 43 economists polled by Bloomberg expects the BoE to cut the interest rates below zero by the end of 2020.
Currently, the central bank’s benchmark interest rate is 0.1%, after policymakers had an emergency meeting in mid-March to address the consequences of the COVID pandemic and the impact of the lockdown. Governor Andrew Bailey said that the BoE was thinking about negative rates for the first time ever, though reviewing such an option would take time.
Besides the pandemic, the BoE should consider the potential failure of a post-Brexit trade deal between the UK and the EU, which will represent another shock for the economy.
Fitch Downgrades India’s Outlook
The pound is under pressure amid fears of negative rates. However, it might maintain near 95.500 against the rupee until the BOE gives its final verdict. As for the rupee, it reflects India’s economic struggle amid the pandemic.
Recently, Fitch Ratings has downgraded its outlook for India’s long-term foreign currency Issuer Default Rating (IDR) from stable to negative. It also maintained the rating at BBB-, which is the lowest investment grade.
Fitch anticipates the Indian economy to contract by 5% in the current fiscal year. The agency said:
“The coronavirus pandemic has significantly weakened India’s growth outlook for this year and exposed the challenges associated with a high public-debt burden.”
