With no respite from rise in food products particularly vegetable prices, retail inflation based on Consumer Price Index (CPI) for October likely to be in the range of 6.7-7 per cent. The headline number in September was 5.5 per cent.

The government will come out with the detailed inflation data on Tuesday at revised time of 4 pm as against 5.30 pm.

Rise in headline number means policy rate cut may be further delayed though expectation is that the Monetary Policy Committee (MPC) is likely to start cutting rate from December. The Committee maintained the repo rate at 6.50 per cent for the ninth consecutive time on October 9, 2024.

The first indication about higher rate came from RBI Governor Shaktikanta Das. In an event earlier this month, he said: “I had said in my monetary policy statement (on October 9, 2024) very clearly that in September and October, the inflation prints are expected to be higher. September came at 5.5 per cent. I reiterate today that the October CPI number is again going to be very high, perhaps higher than the September (CPI) number.”

Echoing the same sentiment, Barclays’ report, authored by Shreya Sodhani and Amruta Ghare, expect CPI inflation at 5.7 per cent. “The acceleration is due to pick-up in momentum in prices, mostly driven by food. (vegetables, oilseeds) and a slight seasonal uptick in core inflation led by housing CPI. We expect food inflation to remain elevated in October at 8.8 per cent y/y (September: 8.4 per cent),” it said.

Rising vegetable prices

The rise in inflation is mostly owing to sharp increase in prices of tomatoes (up nearly 40 per cent) and other vegetables, and prices of oilseeds (with the increase in import duty on edible oils in mid-September, the full effect of the duties will be felt in October). Barring these, momentum seems to be slowing in most food products, including cereals, pulses, sugar, milk and eggs. Retail prices for some products (eg, tomatoes) are softening in the early days of November, while some others (pulses) remain high. Oilseeds should see a drop in inflation in November following the impact of duty changes fully reflected in October. 

“Core inflation is likely to remain stable in October at 3.5 per cent y/y. The seasonal reset in the housing CPI in October and the steady m/m increase in international gold prices lending an upside pressure on personal care CPI are likely to be offset by favourable base effects. We do not expect festive demand for October to result in a sizeable increase in core inflation,” Barclays’ report said.