India's consumer price index climbed to 5.49% in September, marking a significant increase from the sub-4% levels seen in the previous two months. The latest print rose from 3.65% in August and was well above market estimates of 5%. This increase marks the highest inflation rate since the start of the year, surpassing the Reserve Bank of India's 4% target. Food prices in September rose 9.34% year on year, a sharper increase than the 5.66% growth rate logged in August, as reported by the National Statistics Office (NSO) on Monday.
Among these, vegetable prices experienced a particularly sharp increase, rising by 35.99% year-over-year. In contrast, meat and fish prices saw a more moderate rise of 2.66%, while fuel and light bills declined by 1.39%, according to the government agency. The Reserve Bank of India (RBI) has set a 4% annual inflation rate target for the nation's CPI, with a permissible range of +/- 2%. Historically, India's inflation rate peaked at 7.79% year over year in April 2022, and the trend since then has been an irregular decline in inflation rates.
To counteract inflation, the RBI raised its key repurchase rate to 6.5% in February 2023, up from 4% a year earlier. Following this adjustment, the central bank has maintained the repo rate unchanged. However, during its last policy session, the RBI signaled a shift in its stance from 'withdrawing accommodation' to a more 'neutral' position, which is generally interpreted as dovish. The recent spike in India's inflation rate has raised concerns among observers who believe it could delay any potential rate cuts by the RBI.
According to economists at CitiBank (India), the most recent CPI report "has reaffirmed our view that despite a change in stance, near-term inflation risks do not favor a December rate cut," as mentioned in a note distributed by New Delhi-based Business Standard..