Retail inflation based on Consumer Price Index (CPI) is likely to have surged to around 5 per cent in September on account of base effect, combined with rise in food prices. If so, the inflation rate would cross 5 per cent after June.<\/p>\n
The government will make inflation data public on Monday.<\/p>\n
Retail inflation was below 4 per cent for last two months \u2013 July (3.6 per cent) and August (3.7 per cent). This raised the hope for policy interest rate revision. However, considering higher inflationary expectation, the Monetary Policy Committee kept the rate unchanged earlier this month. Following the policy stance, apart from unexpected rise in food prices, volatile global situation is affecting crude and commodity prices and that is also likely to impact headline inflation.<\/p>\n
The first indication about higher inflation came from the RBI Governor Shaktikanta Das\u2019 statement after the MPC meeting. He said: \u201cThe CPI print for the month of September is expected to see a big jump due to unfavourable base effects
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A report prepared by Shreya Sodhani, Regional Economist at Barclays, concurred with the RBI Governor. \u201cWe forecast CPI inflation accelerated in September, as base effects reversed. Momentum in retail prices appears contained, especially for food.\u201d Further, the report estimated that CPI inflation is likely to have picked up pace to 5 per cent in September. \u00a0\u201cThe acceleration was likely driven largely by a reversal of base effects, which had earlier dragged inflation below 4 per cent over July-August,\u201d it said, adding that sequential price pressures are expected to be relatively muted.<\/p>\n
Sodhani sees moderation in food inflation from October onwards. \u201cMomentum seems broadly contained, and with the\u00a0kharif harvest likely to hit the markets in the coming weeks, increased supply of non-perishables may bring down elevated food inflation from Q3,\u201d the Sodhani report said. Das thinks overall inflation rate is expected to come down from next quarter (January-March). \u201cThe headline inflation trajectory, however, is projected to sequentially moderate in Q4 of this year due to good kharif harvest, ample buffer stocks of cereals and a likely good crop in the ensuing rabi season,\u201d he said.<\/p>\n
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Still, he has listed some risks too, though the risks are evenly balanced. \u201cUnexpected weather events and worsening of geopolitical conflicts constitute major upside risks to inflation. International crude oil prices have become volatile in October.
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