RBI Monetary Policy: Governor Shaktikanta Das calls Rupee 'free floating currency'

Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday said that the Rupee is a freely floating currency and its exchange rate is market-determined, adding that the central bank does not have any fixed exchange rate in mind. 

The Governor said this while announcing the decision of the Monetary Policy Committee (MPC). The central bank has hiked the repo rate by 50 basis points to 5.9 per cent -- fourth increase since May.

The movement of the Indian Rupee (INR) has been orderly compared to most other countries and faring much better than several reserve currencies as well as many of its emerging market economies and Asian peers, he said. 

The domestic currency in FY23 so far has depreciated by 7.4 per cent against the US dollar. 

As per Das, the US dollar has appreciated by 14.5 per cent against a basket of major currencies so fath in the current financial year and this has caused turmoil in currency markets globally. 

“The RBI intervenes in the market to curb excessive volatility and anchor expectations. The overarching focus is on maintaining macroeconomic stability and market confidence,” he said. 

The RBI’s actions have helped in engendering investor confidence as reflected in the return of capital inflows since July, the governor said. 

“Our interventions in the forex market are based on continuous assessment of the prevailing and evolving situation from the point of view of our approach. The aspect of the adequacy of forex reserves is always kept in mind. The umbrella continues to be strong,” Das noted. 

Over the medium term, the primacy of price stability embedded in our flexible inflation targeting (FIT) framework provides the anchor for exchange rate stability, he also said.