Wed Oct 09 07:02:12 UTC 2024: ## India’s Inflation Expected to Rise in September, But Food Prices May Cool Down: Barclays

**New Delhi, India** – Barclays forecasts that India’s retail inflation, measured by the Consumer Price Index (CPI), will accelerate to 5% year-on-year (YoY) in September, reversing the downward trend seen in July and August. While this surge is primarily attributed to the unwinding of favorable base effects, sequential price pressures are expected to remain relatively muted, leading to a 0.1% month-on-month increase in headline CPI.

The key driver of this expected inflation bump is food prices. Barclays expects food inflation to jump to 7.3% YoY in September, up from 5.3% in August, driven by a low base effect. However, the report anticipates a moderate 0.07% month-on-month increase in food CPI, as seasonal price surges in vegetables have likely softened. The upcoming kharif harvest is anticipated to bring down elevated food inflation in the third quarter, with increased supply of non-perishable items expected to stabilize prices.

While vegetable prices have peaked for tomato and potato, retail onion prices continue to rise in double digits, but are expected to cool down in October.

Meanwhile, the removal of the export floor price on basmati rice suggests the government’s confidence in domestic rice stocks, particularly with increased kharif rice sowing this year.

Barclays also notes a possible upward pressure on food CPI due to price increases in eggs, meat, and fish in September, following a decline in August.

Deflation in the ‘fuel and light’ CPI is expected to ease to 1.7% YoY in September, driven by fading base effects and a fall in international kerosene prices. Core inflation is also projected to rise to 3.5% in September, up from 3.3% in August.

Despite the expected inflation spike, Barclays predicts that the Reserve Bank of India (RBI) will maintain both policy rates and its stance at its upcoming monetary policy meeting. The MPC will likely wait for data on kharif production and the magnitude of seasonal food price surges before assessing the inflation trajectory.

The recent conflict in West Asia, which has led to rising crude oil prices, adds an element of uncertainty to the situation.

However, Barclays expects an RBI rate cut and a change in stance in December.

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