Inflation Monitor (Oct.)

Headline consumer price inflation is likely to have risen above the RBI’s 4.0% target for the first time in 15 months in October due to another jump in food inflation. This won’t dissuade the central bank from loosening policy further in the near term. However, further monetary easing will support a gradual economic recovery and underlying price pressures should rise soon, which will prompt the central bank to respond with modest rate hikes by the end of next year.