Retail Inflation Hits 9-Month Peak In Sept, Casts Shadow On Rate Cut Expectations In Next MPC

This sharp rise in September followed a rise in food inflation which stood at 9.24 per cent in the month, in comparison to 5.66 per cent reported a month earlier

The retail inflation in the country soared to hit a nine-month peak of 5.5 per cent in September, official data from the government revealed on Monday. This surge was attributed to higher food prices in the country.

Meanwhile, the inflation figure stood below the 4 per cent mark at 3.65 per cent in August, reported Moneycontrol. This sharp rise in September followed a rise in food inflation which stood at 9.24 per cent in the month, in comparison to 5.66 per cent reported a month earlier. 

Inflation In Vegetables And Fruits

Food prices increased 1.18 per cent on a sequential basis, resulting in a 0.62 per cent hike in consumer prices. Vegetable inflation played a crucial role in the inflation rate surging. In vegetables, this price rise was driven by potatoes which saw a 65 per cent jump in prices in September against the same period a year earlier.

Meanwhile, the price of onions rose 66.1 per cent and tomatoes became more expensive by 42.2 per cent, against the year-ago period. Edible oil inflation also climbed 2.5 per cent from -0.9 per cent logged in the previous month after the government decided to restrict the imports of the commodity by imposing higher duties.

Fruits inflation hit a peak of 7.6 per cent in September in comparison to 6.5 per cent clocked in the previous month. 

Rate Cut Expectations

Earlier last week, the Reserve Bank of India in its Monetary Policy Committee (MPC) meeting decided to maintain the status quo on key rates for the tenth consecutive time but changed its stance to neutral. The central bank also estimated inflation easing up and average at 4.5 per cent in 2024-25. 

However, citing experts, the report noted that it seemed difficult for the regulator to consider rate cuts in its upcoming meeting in December. Aditi Nayar, Chief Economist, ICRA explained, “For a rate cut to be forthcoming in the December 2024 policy review, either the CPI inflation will need to flatten considerably below 5 per cent in the next print or the GDP growth for Q2 FY2025 will need to significantly undershoot the MPC’s expectations.”