Perspective on CPI Data by Ms. Madhavi Arora, Chief Economist, Emkay Global Financial Services
Below the Perspective on CPI Data by Ms. Madhavi Arora, Chief Economist, Emkay Global Financial Services
“Oct CPI at 6.09% was in-line with our estimate (6.11%), driven by an unfavorable base effect and continued food inflation. While the food inflation print of 8.94% also reflects an extremely unfavorable base, momentum was also high, at 0.9% mom, and a 3m avg of 1.2% mom. Core and core ex-precious metals are also likely to have risen, although momentum may have remained contained.
We expect 3QFY27E headline inflation at 6.1%, implying negative real policy rates, even with another rate hike. Certain categories (restaurants and accommodation, clothing and footwear) continue to exhibit passthrough of higher energy prices, while food price pressures are also broadening. Both headline and core inflation are likely to remain elevated in 2HFY27E due to an unfavorable base as well as potential second round effects of higher food and energy prices. A strong and extended El Nino adds risks for the upcoming rabi season and therefore for food inflation
While the recent retreat in oil prices has provided some comfort to Indian markets, with large FPI inflows and reduced pressure on the currency, inflation pressures are set to remain elevated, with headline CPI likely to average 5.9% for the next three quarters. As a result, we retain our call for 75bps of total hikes in this cycle, with 25bps each in Dec-26 and Feb-27.”
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