India’s inflation surged to a nine-month high in September, climbing to 5.49% year-on-year, Bloomberg reports, citing data released by the Statistics Ministry on Monday.
This unexpected acceleration, exceeding both August’s figure of 3.65% and economists’ forecast of 5.1%, has cemented the Reserve Bank of India’s (RBI) stance of maintaining caution regarding interest rate cuts.
The surge was primarily driven by soaring food prices, which constitute a significant portion of the consumer price index (CPI). Food prices jumped 9.24% year-on-year in September, driven by a staggering 36% increase in vegetable prices.
While the RBI last week acknowledged the expected inflationary spike in September due to statistical factors, they left the benchmark interest rate unchanged at 6.5%. They did, however, ease their policy stance, hinting at potential rate cuts in the future. However, Governor Shaktikanta Das has emphasized his commitment to achieving a durable 4% inflation target before considering any easing measures.
Despite the current spike, there are indications that inflation may moderate in the coming months. The recent bountiful monsoon, the best in four years, is expected to lead to a bumper harvest of crops like rice, boosting rural economic prospects and potentially tempering food prices.
The core inflation rate, excluding volatile food and fuel components, also climbed slightly to 3.56% from 3.44%.
Housing prices rose to 2.78% year-on-year, while clothing and footwear costs remained largely unchanged at 2.7%.
The current inflation figures have reinforced the RBI’s cautious approach, highlighting the importance of achieving sustained price stability before considering interest rate cuts. However, the positive outlook from the monsoon could provide a much-needed counterbalance in the months ahead.
