Pushed by food bills, India's consumer price index (CPI) rose 6.21% in October on year, breaching the target ceiling of the nation's central bank, the Reserve Bank of India (RBI).
For more than a year, India's monthly inflation rate on-year has logged under 6%, or within the RBI's target inflation band of 2% to 6%, raising hopes that the RBI could begin an easing regimen on monetary policy.
But the RBI, facing renewed inflation, will likely forego a rate hike at the central bank's next policy meeting, in December, said HSBC Global Research, in a letter to clients.
We "expect the RBI to stay on hold in the December meeting, but deliver its first rate cut in February 2025, by which time it will likely have gained some confidence that the food price spike" will have moderated, said HSBC Global Research.
Indian consumers have faced higher food bills in recent months, with a food-cost index rising by 10.87% in October on year, spurred by vegetable and cooking oil costs.
Housing costs for Indian consumers rose 2.81% on year in October, and electric utility bills by 5.45%, according to officials.
Like many nations, India faced a surge of inflation rates during and in the aftermath of the pandemic era, striking a crest of 7.79% on year in April of 2022.
Since then, India's official inflation rate cooled a little and even sank to under 4% in the summer months, but has started to creep up again in recent months.
To cool inflation, the RBI raised its key policy from 4% in April of 2022 to 6.5% in May of 2024, where it has remained since.
At the conclusion of its most recent policy session, held in early October, the RBI stated that "the domestic growth outlook remains resilient supported by domestic drivers of private consumption and investment. This provides headroom for monetary policy to focus on the goal of attaining a durable alignment of inflation with the target."
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