Economists see food, oil stoking September inflation

India's consumer inflation is expected to accelerate in September, approaching the upper limit of the Reserve Bank of India's 2%-6% target range, according to a Reuters poll of economists. The surge is attributed to rising energy costs and elevated food prices. Brent crude oil prices have surpassed $100 a barrel, while a weak monsoon season has driven up food prices.

Food and beverages constitute roughly 40% of India's Consumer Price Index basket. The Reserve Bank of India raised its key repo rate by 25 basis points to 5.50%, marking the first increase in nearly four years and signaling potential further policy tightening. Consumer inflation, as measured by the annual change in the CPI, likely rose to 5.40% in September from 4.82% in August, based on the median forecast of 41 economists, ranging from 4.90% to 5.90%.

This would be the fourth consecutive month that inflation has surpassed the RBI's 4% medium-term target and the highest this year. Economists attribute the inflation rise to both food and energy prices, with Brent crude prices exceeding $100 per barrel and a deficient monsoon season impacting food costs. Core inflation, excluding volatile components like food and fuel, is projected to reach 4.3% in September.

The weaker rupee, which has depreciated by around 7% against the dollar and is near its all-time low, adds to inflation risks for the import-dependent economy. Despite some economists suggesting the RBI might refrain from alarming the world by announcing a rate hike, experts believe that the underlying price pressures in the economy necessitate more aggressive monetary policy measures.