 "India's consumer inflation at 14-month high of 6.2%, first breach of RBI tolerance band since Aug 2023")
India’s retail inflation rose to 6.21 per cent on an annual basis in October, according to government data released on Tuesday (November 12). The price hike digits are now up from a nine-month high of 5.49 per cent noted in September.
This increase was primarily driven by persistently high food prices.
The October spike marks the first time in 14 months— since August 2023— that the inflation rate exceeded the Reserve Bank of India’s (RBI) tolerance ceiling of 6 per cent.
Last month, inflation had already surpassed the RBI’s medium-term target of 4 per cent for the first time since July.
Will price rise continue?
Upasna Bhardwaj, the Chief Economist at Kotak Mahindra Bank, Mumbai, said that “the sharply higher-than-expected CPI inflation has largely been led by a surge in vegetable prices but also a sharp pickup in core inflation.”
Gaura Sen Gupta, India Economist at IDFC First Bank, Mumbai, said that “food inflation pressures are expected to ease in the coming months with improvements in supplies. Kharif output is expected to be higher by 7 per cent.”
Food inflation in India jumped to 10.87 per cent. In September this year, that number was at 9.24 per cent, according to the latest data. Year-on-year, i.e., in October 2023, food inflation was 6.61 per cent.
What will RBI do?
Sen Gupta added that, “From a monetary policy perspective, RBI is expected to remain on pause in the December policy due to upside risks to near-term inflation outlook.”
Impact Shorts
More ShortsThe RBI’s rate-setting body, the Monetary Policy Committee (MPC), had last month changed its stance to neutral, opening the door for potential rate cuts.
However, the central bank’s governor, Shaktikanta Das, had clarified that a shift to a neutral stance “should not be understood as a potential interest rate cut." He had back then warned of some “significant upside risks to inflation.”
With inputs from Reuters
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