CPI inflation moderated further to a 5-month low of 4.87%YoY in Oct-23, though defying expectations of a slightly stronger pullback.
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Food and beverages index rose by 95 bps sequentially even as prices of vegetables and fruits remained broadly subdued, along with Oilseeds and Meat & fish. The sequential momentum was a derivative of strong price pressures seen in Cereals, Spices, Pulses and Eggs yet again – an extension of recent trend. Adding to these dynamics, is the strong run-up in onion prices since late Oct-23 and advance estimates of Kharif production being somewhat pessimistic for pulses and oilseeds, both. The H2 FY24 trajectory of CPI inflation is expected to remain broadly ranged between 5.0-6.0%. With food inflation near its bottom and global fuel prices displaying volatility with risks attached to upside given geopolitical uncertainty, the major straw of comfort is drawn from Core inflation. As such, we hold on to our FY24 CPI forecast of 5.5%, with RBI’s rate easing cycle expected to commence in Q2 FY25.