Inflation at 10-month high, dampens rate-cut hopes

Wholesale price index (WPI) based inflation rose to 7.81 per cent in September led by a rise in prices of cereals, wheat, fuel and manufactured products, official data released on Monday showed. Though headline inflation in September was only marginally higher than the 7.55 per cent in August, it is the highest since November 2011 when it touched 9.46 per cent.

“It is not only fuel but even core inflation as can be seen in manufacturing products that has risen sharply. Headline inflation is likely to rise in the coming months as there will be a surge in demand during festival season. Further, the fuel price hike will be transferred into prices of non-fuel commodities,” said NR Bhanumurthy, a professor at National Institute of Public Finance and Policy.

Retail or consumer price index-based inflation stood at 9.73 per cent in September, partially lower than 10.03 per cent in August. Analysts had however warned that the CPI inflation data for September did not capture the full impact of the fuel price hike.

“We expect food and overall inflation to inch higher in the coming quarter due to the second-round effects of higher diesel prices,” Nomura said in a report. The government on September 13 kicked off long-pending reforms including a Rs 5 hike in diesel and capping the number

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