Sign in Subscribe
Banks (Finance)

India's Consumer Price Index (CPI) Based Inflation Moderates to 5.02% in September, RBI Expected to Keep Rates Unchanged

Strategic Insights

— 1 min read

The Reserve Bank of India (RBI) is likely to hold interest rates steady in the near term, with inflation moderating to 5.02% in September from 6.83% in August, according to economists. The sharp decline in vegetable prices, particularly tomatoes, has contributed to the easing of inflation pressures. Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, expects the Monetary Policy Committee (MPC) to opt for a pause in rate hikes for the rest of FY24 and consider a rate cut in Q2 of CY24.

Key Takeaways:

  • The CPI based inflation rate moderated to 5.02% in September, a three-month low, from 6.83% in August.
  • The sharp decline in vegetable prices, especially tomatoes, contributed to the easing of inflation pressures.
  • Core inflation, which excludes food and fuel, declined to a 42-month low of 4.5% in September.
  • The RBI is expected to stay vigilant and actively manage inflationary pressure through its liquidity measures.
  • Economists predict that the RBI may maintain its policy rate and stance for the fiscal year, with the MPC possibly opting for a rate cut in Q2 of CY24.
  • Experts warn that weak sowing in key kharif crops and elevated crude oil prices due to the Middle East conflict may pose risks to inflation in the coming months.

Statistics:

  • CPI inflation rate declined to 5.02% in September from 6.83% in August.
  • Core inflation rate declined to a 42-month low of 4.5% in September.
  • Vegetable prices, particularly tomatoes, plummeted 64.9% on a monthly basis in September.
  • Food prices comprise 17.8% of the CPI basket.

Sources:

  • National Statistical Office
  • Reserve Bank of India
  • Geojit Financial Services
  • CareEdge Ratings
  • PwC India
  • CRISIL
  • Kotak Mahindra Bank
  • Biz2Credit and Biz2X

Read more