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International
IMF Urges Rupee to Absorb Shock of Fed Rate Hike
✍️ Business Standard
🗓 05 Oct 2026, 07:38 AM
👁 18
The IMF has advised that the Indian rupee should act as a shock absorber to mitigate the impact of the U.S. Federal Reserve's recent rate hike.
The International Monetary Fund (IMF) has issued a statement urging India to allow the rupee to absorb the shock from the recent U.S. Federal Reserve rate hike. The IMF noted that a flexible exchange rate can help cushion the economy against sudden capital outflows and market volatility.
The Federal Reserve raised its benchmark interest rate by 0.25 percentage points, a move that has tightened global liquidity and pressured emerging‑market currencies. India’s rupee has already shown signs of volatility as investors reassess risk premiums.
By permitting the rupee to adjust, the IMF believes India can avoid abrupt adjustments in domestic inflation and preserve competitiveness in exports. A moderated exchange rate can also reduce the need for immediate policy tightening in the short term.
Economists suggest that while the rupee’s flexibility may help stabilize the economy, it could also lead to a temporary rise in import costs. The Reserve Bank of India will likely monitor the situation closely to balance external shocks with domestic price stability.
The Federal Reserve raised its benchmark interest rate by 0.25 percentage points, a move that has tightened global liquidity and pressured emerging‑market currencies. India’s rupee has already shown signs of volatility as investors reassess risk premiums.
By permitting the rupee to adjust, the IMF believes India can avoid abrupt adjustments in domestic inflation and preserve competitiveness in exports. A moderated exchange rate can also reduce the need for immediate policy tightening in the short term.
Economists suggest that while the rupee’s flexibility may help stabilize the economy, it could also lead to a temporary rise in import costs. The Reserve Bank of India will likely monitor the situation closely to balance external shocks with domestic price stability.