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
“The Sep CPI print is in line with our estimates, with the increase driven by food prices, while core-core inflation momentum likely risen further. We expect 3QFY27 inflation to average close to 6.1%, implying real policy rate would stay negative even with higher rates. We reckon that beyond oil-related input costs, adverse weather is adding to food-price pressures, with El Niño potentially persisting into 2027. Cyclical production swings and greater crop diversion to biofuels add further supply-side risks. Meanwhile, core inflation is likely to rise in 2H on base effects, with second-round pressures an added risk as higher energy and commodity costs feed into output prices. The widening WPI-CPI gap also points to latent pipeline price pressures.
With inflation set to rise in coming quarters, the key determinant of the rate hike cycle’s duration will be whether price pressures become more broad-based from current levels. But against the backdrop of fluid and volatile global conditions, we remain watchful and retain our call for 75bp of cumulative hikes in this cycle, with another 25bp each in Dec-26 and Feb-27.”
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