Consumer Inflation Rises To 3.99% In September, Here's What Experts Say

Retail inflation rate rose to 3.99 per cent in September, driven by higher food prices, the government said on Monday, close to the central bank's 4 per cent medium-term inflation target.

Annual retail inflation in September was much higher compared with 3.21 per cent in the previous month, and analysts' forecasts.

Analysts polled by Reuters had forecast a retail inflation rate of 3.70 per cent for September.

SAKSHI GUPTA, ASSISTANT VICE-PRESIDENT, HDFC BANK, GURUGRAM

"The increase in CPI has been driven by a rise in food inflation, especially in urban areas. Our sense is that this spike is transitory."

"Fuel and core inflation continues to remain low and will keep the overall CPI trajectory in check. We continue to expect the RBI to lean towards pushing growth and deliver further rate cuts this year."

ANAGHA DEODHAR, ECONOMIST, ICICI SECURITIES, MUMBAI

"The increase in inflation is mainly due to rising vegetable prices. Onion prices shot up during September due to supply disruption. Hence, the rise in inflation was expected."

"Now, tomato prices have also started rising sharply. So, this trend could persist in October as well. We had expected inflation to breach 4 per cent by November, but it happened two months earlier. If vegetable prices remain high in the coming weeks, full-year inflation could be higher than 3.65 per cent."

SUVODEEP RAKSHIT, SENIOR ECONOMIST, KOTAK INSTITUTIONAL EQUITIES, MUMBAI

"The increase in CPI inflation to 3.99 per cent in September is mainly on the back of food prices, especially urban food inflation, even as low rural food inflation keeps the overall food inflation under check."

"The increase in food prices have been due to a spurt in vegetable and pulses prices, which will most likely be transient. Core inflation continued to soften due to the impact of lower fuel prices and, to some extent, gold prices. It will likely soften further as rural health and education inflation normalize over October-December."

"Overall, with the CPI inflation on track to be around the 4 per cent mark over next few quarters, the RBI will continue to focus on the growth trajectory as demand conditions remain weak. We continue to expect the RBI to have room for another 50 basis points or bps of rate cuts by end-FY2020."

RUPA REGE-NITSURE, GROUP CHIEF ECONOMIST, L&T FINANCIAL SERVICES, MUMBAI

"While the CPI print looks higher at 3.99 per cent, it is entirely on the back of sharp spikes in the prices of vegetables, meat and fish, and pulses."

"Core inflation, which is a proxy for demand conditions has collapsed to 4.01 per cent. On a year-on-year basis, it has come off by 181 bps. WPI core has already become negative. Prices of perishables like vegetables and meat will get normalised as soon as monsoon-related transport disruption is over."

"Pulses too may not pose any risk, as conditions for Rabi pulses are highly favourable due to healthy water reserves. The RBI will pay close attention to weak IIP print and demand slowdown."

"A possibility of rate-cut certainly exists, but its magnitude will depend on how HFIs behave in Q3, FY20."

GARIMA KAPOOR, ECONOMIST AND VICE-PRESIDENT, ELARA CAPITAL, MUMBAI

"The recent increase in headline CPI print has been on account of firming up of food inflation, especially in urban areas."

"Arrival of Kharif harvest and prospect of a good Rabi crop owing to comfortable water table in reservoirs means that food prices are expected to cool from November onwards, helping inflation to trend back to RBI's (Reserve Bank of India) projected levels and providing room for the RBI to cut rates. We expect the MPC (Monetary Policy Committee) to cut policy repo rate by another 50 bps until FY20-end with a 25 bps cut in December."

"All high frequency indicators of demand indicate soft demand conditions."

"While a low stable inflation is generally good, there is an urgent need for some inflation in the food economy that would help improve terms of trade of the rural economy, thereby supporting demand."