Quote on CPI by Aditi Nayar, Chief Economist, ICRA Ltd
Below the Quote on CPI Data by Aditi Nayar, Chief Economist, ICRA Ltd
"The CPI inflation print exceeded the upper limit of the RBI’s tolerance band in October 2026, printing at 6.1% in the month, in line with ICRA’s projections. The sustained uptick in food & beverages (F&B) inflation played the key role in pushing up the headline inflation number, even as the hardening was broad-based across 11 of the 12 divisions.
ICRA expects the YoY inflation in the F&B segment to remain elevated above the 8.0% mark in November 2026, similar to the print seen in October 2026, with upward pressure from prices of items such as milk, sugar and onions. Moreover, the deficient monsoon and inadequate replenishment of reservoir levels have heightened concerns regarding the rabi crop outlook and food inflation.
Core inflation is expected to inch up further in November 2026, partly owing to the unfavourable base effect arising from GST rationalisation, which would keep the headline CPI inflation elevated at ~6.1% in the month.
Overall, ICRA expects CPI inflation to average at ~6.2% in Q3 FY2027, slightly higher than the MPC's projection for the quarter (+6.0%), before easing modestly thereafter as the adverse base effect dissipates. However, risks remain tilted to the upside, reflecting the impact of the deficient and uneven monsoon, while crude oil prices remain a key monitorable.
With the CPI inflation set to remain above the 6% upper bound of the RBI’s tolerance band over the next couple of months, and GDP growth likely to ease only slightly in Q2 FY2027 relative to the previous quarter while remaining above the 7.0% mark, a further 25 bps rate hike in December appear almost certain. Thereafter, the trajectory of crude oil prices, which have cooled in the recent sessions, will be critical in shaping the need for and extent of additional rate tightening in 2027."
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