India’s retail inflation in September accelerates to a five-month high of 7.41% YoY

BENGALURU, Oct 12 (Reuters) – India’s retail price inflation accelerated in September to a five-month high of 7.41 percent year on year, driven by soaring food prices, making fear of further rate hikes when the central bank meets for its next policy review in December.

Annual retail inflation (INCPIY=ECI) in September was above the 7.3% forecast in a Reuters poll of economists, and above 7% the previous month, according to data released by the National Office on Wednesday. statistics.

The latest data shows that retail price inflation remains above the Reserve Bank of India’s target for three quarters, implying that it will have to inform the government of the reasons why it has not reached the target. objective and the measures it will take. Read more

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COMMENT

ADITI NAYAR, CHIEF ECONOMIST, ICRA, GURGAON

“Another rate hike is certain in the December 2022 MPC review, after the uncomfortable inflation print of 7.4% for September 2022. The quantum of the next rate hike will be determined by how much the inflation print in October 2022, as well as the strength of GDP growth in the second quarter of fiscal 2023.

“Excessive rainfall in early October 2022 could negatively impact the kharif harvest and delay rabi plantings, posing a significant upside risk to the outlook for food inflation. However, the impact of the same on year-over-year food inflation prints is likely to be partly mitigated by the elevated base that awaits us for H2 FY2023.”

SUVODEEP RAKSHIT, PRINCIPAL ECONOMIST, KOTAK INSTITUTIONAL EQUITIES, MUMBAI

“CPI inflation in September at 7.41% was in line with our expectations at 7.35%. Food products continue to see rising price momentum, particularly in grains and vegetables. declining area and unseasonal rains will continue to drive up food prices.

“Underlying inflation at 6.26% is in line with the trend of the past 4-5 months and will likely hover around that handle for the remainder of fiscal 2023.

“We believe September inflation should keep the RBI on track for a 35 basis point rise in December, with inflation remaining above 6% until at least February 2023, and gradually reducing towards the range of 4.5 to 5.5% in fiscal year 2024.

“External sector concerns as well as uncertainty over energy prices will keep the RBI’s policy going depending on additional data and events.”

RADHIKA RAO, SENIOR ECONOMIST, DBS BANK, SINGAPORE

“September’s high reading marks three straight quarters of inflation above 6%, leading to a failure in the inflation mandate, and will force the central bank to explain that failure.”

“Besides base effects, the pre-harvest seasonal rise in food categories added to the headline, compounded by erratic rainfall, pushing perishables and grains higher, while fundamental pressures remained sticky.”

“Politics is likely to maintain a hawkish bias toward above-target inflation and a weaker currency, making it more difficult for the central bank to fight inflation.”

GARIMA KAPOOR, ECONOMIST, INSTITUTIONAL EQUITIES, ELARA CAPITAL, MUMBAI

“Going forward, we expect the CPI to average closer to 6% only by the fourth quarter of FY23E and we expect CPI inflation for FY23-6 .5%, with an upward bias.”

“We expect the Monetary Policy Committee (MPC) to raise the repo rate by another 40-50 basis points this fiscal year. If CPI inflation does not moderate to a level near 6% in Q4FY23, further rate hikes could open.”

KUNAL KUNDU, INDIA ECONOMIST, SOCIETE GENERALE, BENGALURU

“At 7.4% year-on-year, the CPI was above our expectations and those of the market. The surge, unsurprisingly, was led by food prices.”

“From the perspective of households, with food representing almost 40% of the total consumption basket, the impact of rising food prices is much more severe on their purchasing power, in particular on discretionary spending, than in the case where food is a relatively smaller share.

“For the central bank, however, the biggest challenge is firming up underlying inflation. We expect the RBI to hike another 60 basis points in FY23, with the final policy rate likely to touch 6.5%.”

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Reporting by Chris Thomas, Rama Venkat and Nivedita Bhattacharjee in Bengaluru; Editing by Savio D’Souza

Our standards: The Thomson Reuters Trust Principles.

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