Keeping in view the recent developments in rupee, Credit Suisse said that chances of the RBI cutting rates at July 30 meeting are close to "zero", but on the reverse if the rupee continues to plunge further rate hikes will come onto the agenda.
In a research note, Credit Suisse said, "The depreciation of the rupee means the chance of the RBI cutting interest rates at its next meeting on July 30 is virtually zero, and indeed there is probably a higher risk of rate hikes not cuts right now, given Subbarao's hawkish nature."
With regards to inflation, Credit Suisse said if the rupee were to stabilise at the current level, WPI inflation will be boosted by 50 to 75 basis points taking into account the softening in USD-denominated commodity prices to date.
The report, however, ruled out a repeat of the 1991 balance of payment (BOP) crisis as "premature".
"The country's forex reserves (which cover around six months of imports and are nearly three times the size of short term external debt) also buys the country plenty of time," Credit Suisse said.