India inflation likely to ease to four-month low in October, says Reuters poll 

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The pace of India’s consumer price inflation is anticipated to have eased to a four-month low of 4.80 per cent in October, nearing the Reserve Bank of India’s 4 per cent medium-term target, a Reuters poll revealed on Thursday.  

The poll, conducted from November 6-9 with 53 economists, suggested a slowdown from the 5.02 per cent rate recorded in September. Volatile food prices, constituting about half of the consumer price index (CPI) basket, are expected to have moderated after a spike in July and August.  

However, despite this overall moderation, onion prices, a staple in Indian cooking, continue to rise sharply, adding a layer of complexity to the inflation dynamics. 

“I’m expecting a further slide in inflation in October, thanks primarily to a continued moderation in food inflation. Underlying our forecast is a fall in food and beverage inflation to below 6 per cent,” Reuters quoted Miguel Chanco, Chief Emerging Asia Economist at Pantheon Macroeconomics as saying.  

Chanco further noted, “Beyond October, I wouldn’t be surprised if there is some stickiness in the headline rate, particularly if the ongoing increase in onion prices persists. But stickiness is very different from a surge, and I don’t expect any breach of the target range in the foreseeable future.” 

While the slowing pace of price increases may offer some relief to the Reserve Bank of India (RBI), achieving its mandate to anchor inflation to the 4 per cent mid-point target remains a distant prospect. The central bank is anticipated to maintain its key policy rate at 6.50 per cent at least until the end of June 2024, followed by a 25 basis points cut in the subsequent quarter, as indicated by a separate Reuters survey.  

The projection suggests that headline inflation may not return to the RBI’s mid-point target until at least the second half of 2025. 

“Inflation is expected to have a choppy ride in the months ahead… Passage of base effects and a sharper rise in selected vegetable prices are likely to take the headline back above 5 per cent this quarter and keep in that territory into 1Q24,” Reuters cited Radhika Rao, a Senior Economist at DBS Bank. 

She emphasised the cautious stance of the central bank on the inflation outlook, suggesting a likelihood of an extended pause before considering any change in policy direction. 

(With inputs from Reuters)

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