Rupee Hits Record Low, But RBI May Avoid Aggressive Rate Hikes

Summary

The Indian rupee has weakened significantly, falling nearly 6% since late February. It slipped to a record low of around 96.96 against the US dollar. The Reserve Bank of India appears reluctant to use aggressive interest rate hikes to defend the currency. Officials fear small rate hikes may harm domestic demand and growth. The RBI is evaluating alternative measures to support the rupee. Consumer price inflation is nearing 5%.