- Indian Rupee (INR) rises after losses yesterday
- Indian inflation falls to 4.75%
- US Dollar (USD) falls versus its major peers
- FOMC left rates unchanged
The US Dollar Indian Rupee (USD/INR) exchange rate is falling after yesterday’s gains. The pair rose 0.12% in the previous session, settling on Wednesday at 83.60. At 20:00 UTC, USD/INR trades -0.16% at 83.46 and is in a range of 83.43 to 82.60.
Indian retail inflation rose slightly in May amid a fall in fuel prices, while food prices remained high. Annual retail inflation was 4.75% in May, down from 4.83% in April. This was below the 4.89% that economists had forecast.
Food inflation, which accounts for almost half of the consumer price basket, rose 8.69% annually in May compared with 8.70% in the previous month.
Core inflation, which strips out food and fuel, is 3.12% compared to 3.23% in April. Containing food prices will be a key focus for newly sworn-in Prime Minister Narendra Modi amid intense criticism for not being for not containing prices earlier.
The US Dollar is falling across the board. The US Dollar Index, which measures the greenback versus a basket of major currencies, trades at -0.6% at the time of writing at 104.60, after three days of gains.
The USD saw increased volatility today after inflation came in cooler than expected and after the Federal Reserve’s interest rate decision.
US inflation cooled more than expected, falling to 0% month on month in May, down from 0.3% in April. On an annual basis, inflation remained unchanged at 3.4%. Meanwhile, core inflation was also softer than expected, falling to 3.4% year on year, down from 3.6%.
Following the inflation data, and as expected, the Federal Reserve left interest rates unchanged at a 22-year high of 5.25% to 5.5%. However, Federal Reserve officials dialed back their forecasts to just one 25-basis-point rate cut in 2024, down from three rate cuts forecast in March.
Despite the change in the Fed’s forecasts, the market held in place expectations that the Federal Reserve would cut interest rates twice this year. Following the inflation data, the repriced up from 1.
The Federal Reserve noted modest further progress towards the central bank’s 2% inflation target. This was a slight change to the previous statements which pointed to a lack of progress.
