India's retail inflation surged to a 14-month high in October, driven by a jump in vegetable prices and dashing hopes of an interest rate cut by the central bank next month.
The annual retail inflation of 6.21% in October breached the central bank's tolerance band for the first time in more than a year, and was higher than the estimate of 5.81% in a Reuters poll, government data released on Tuesday showed.
The Reserve Bank of India (RBI) is mandated to keep inflation in a range of 2%-6%, with a medium term target of 4%.
In September, inflation stood at 5.49%, which was a nine-month high.
Rising food prices have reduced the purchasing power of middle-income households, affecting corporate earnings and hurting growth in Asia's third-largest economy.
The central bank has forecast GDP growth at 7.2% for financial year 2024-25 but private forecasters have started to pare estimates following signs of weakness in urban consumption.
Despite this, high inflation will mean the central bank will likely delay an interest rate cut even though it changed its monetary policy stance to 'neutral' from 'withdrawal of accommodation' in October, signalling lower rates ahead.
"Today's inflation print closes the door for a rate cut in the December policy by the RBI," said Sakshi Gupta, principal economist, HDFC Bank.
"We see a possibility of a move only in the February policy," said Gupta, adding that retail inflation for the current fiscal year was likely to overshoot the central bank's forecast of 4.5%.
Annual inflation for food items, which account for nearly half of the consumption basket, rose to 10.87% from 9.24% a month ago.
Vegetable prices rose 42.18% in October from a year earlier after rising 36% in September.
The inflation rate for cereals was 6.94% compared to 6.84% in September, while that for pulses was 7.43% against 9.89% a month earlier.
The inflation rate for oil and fats was 9.51% compared to 2.47% in the previous month, mostly due to an increase in edible oil prices.
Sequentially, prices of vegetables saw the sharpest jump.
"We do not expect food prices to correct before mid- November, thus preventing any meaningful moderation in the November CPI print," said Garima Kapoor, an economist at Elara Securities.
Core inflation, which excludes volatile food and fuel prices, remained stable at close to 3.7% in October.
