DBS Bank forecasts the Indian rupee will remain supported in the near term as softer inflation provides room for the Reserve Bank of India to maintain steady interest rates, though risks from energy prices and external factors loom.
DBS Bank expects the Indian rupee to hold up in the near term as softer inflation gives the Reserve Bank of India room to keep interest rates unchanged. The bank’s view is that easing price pressures, especially in core inflation, reduces the case for tighter policy and helps support foreign interest in Indian assets.
That judgment comes against a backdrop of a central bank that has already signalled caution. The Reserve Bank of India has left its benchmark rate unchanged in recent policy meetings, and Reuters has previously reported that the monetary authority is placing greater emphasis on stability rather than rushing to loosen or tighten policy. A steady rate path can help limit currency swings, particularly when domestic growth remains resilient and external balances are manageable.
DBS economist Radhika Rao has also warned that the picture could become more complicated if energy prices stay elevated. In comments to Moneycontrol, she said inflation risks would tilt higher if oil remained above $70 a barrel for a prolonged period, while geopolitical tensions in the Middle East were keeping sentiment fragile. TMGM reported that DBS still expects the RBI to keep rates unchanged in 2026, relying on foreign-exchange intervention and liquidity tools to defend the rupee if needed.
For now, the currency is likely to trade in a constrained range, with any sharp fall cushioned by the RBI’s reserves and willingness to smooth volatility. As Indian Express has noted, the central bank’s earlier decision to hold rates steady also helped borrowers by keeping lending costs stable. But DBS sees risks from another jump in crude prices, a wider current account deficit or a stronger-than-expected slowdown in the United States, any of which could quickly weaken the rupee.
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