Posting a print of 5.49%YoY compared to 3.65% in Aug-24, India’s CPI inflation jumped sharply in Sep-24 to the highest level seen in 2024 so far
Download ReportQuantEco Research || Sep-24 CPI - Base impairs, momentum cripples
The annualized inflation surge was led by an unfavorable statistical base and strong sequential momentum in food prices in the month. While food inflation could remain elevated in Oct-24, the supportive winter seasonality should start curbing price pressures thereafter amidst healthy reservoir levels and expectation of a favorable Rabi output later on in the year. However, geopolitical situation remains fragile, with international commodity prices on close watch. Amidst these pulls and pressures, we maintain our FY25 CPI inflation forecast of 4.5% vs. 5.4% in FY24 (with inflation averaging at 4.6% in H1 FY25, likelihood of meeting the full year target remains feasible). We continue to expect the MPC to start its monetary policy easing cycle with a 25 bps rate cut in Dec-24. The shift in the monetary policy stance to neutral in Oct-24 paves way for an actual pivot – in the Dec-24 MPC meeting. This would essentially be contingent upon no untoward surprises. We would be monitoring closely 1) Extent of seasonal food price correction 2) Momentum in monetary policy easing by key central banks and 3) Geopolitical environment.