India’s macro backdrop remains resilient, with growth projected at 6.8% and inflation at the lower end of the RBI’s 2–6% target range. While trade tensions with the US have eased and tariff reductions are possible, the RBI is expected to maintain rates at 5.50% near term, supported by stable inflation and policy flexibility. The rupee has weakened modestly this year but is expected to remain broadly stable, with USD/INR seen around 89 by end-2026, Commerzbank's FX analysts Charlie Lay and Moses Lim report.

RBI seen on hold after front-loaded rate cuts

"The macro environment remains stable despite the US tariff uncertainties. Growth is expected to be around 6.8% for the current fiscal year and inflation to be the lower end of RBI's 2-6% target range. RBI has front-loaded rate cuts to support growth and the weaker INR should also help to absorb some of the tariff shock."

"Trade tensions with the US have subsided and there are suggestions US tariffs could be lowered to 15-16% in exchange for increased purchases of US imports and halting Russian oil imports. The GST2.0 reform provided a positive boost to consumer and investor confidence. It simplifies the tax structure and will lower prices in general."

"RBI is expected to leave rates unchanged at 5.50% near term, but the benign inflation backdrop gives it room to cut if required. INR has been on the backfoot this year and is down over 3% vs USD year-to-date. We expect RBI to favor a relatively stable USD/INR and we project around 89.00 by end-2026."