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Consumer inflation is tracking close to 6.3 per cent in November, with an upward bias, raising the possibility of another interest rate hike by the Reserve Bank of India (RBI) in December, according to a report by Union Bank of India.
Our Nov print is currently tracking close to 6.30% with an upward bias, though food price trends need close watch, the report said. The report expects the RBI to raise the repo rate by 25 basis points to 5.75 per cent at its December monetary policy meeting, with a further increase to 6 per cent possible in subsequent meetings. It also flagged the possibility of a larger 50-basis-point hike as a one-time measure. Overall, we see a 25bps hike in December, yet a one and done for now 50bps may not be ruled out, it said. The bank said food inflation was expected to remain the main driver of headline consumer price increases in the coming months. The pace of rabi sowing, weather conditions and the speed of supply normalisation would be critical in determining the inflation trajectory. Early November price data showed continued increases in cereals, pulses and sugar. Mandi-level prices of cereals and pulses rose 2.50 per cent and 2.48 per cent, respectively, until November 11, while sugar prices increased 5.02 per cent during the period. The report said inflationary pressures were also broadening beyond food. October core inflation, excluding auto fuels, rose to 4.51 per cent from 4.33 per cent in September, while core inflation excluding precious metals increased to 3.78 per cent from 3.22 per cent. Headline CPI inflation had risen to 6.09 per cent in October from 5.54 per cent in September, returning to the RBI's upper tolerance limit. Food inflation increased to 8.50 per cent from 7.36 per cent during the same period. For the full financial year 2026-27, Union Bank's CPI inflation projection, based on crude oil prices of USD 90 per barrel, is broadly in line with the RBI's projection of 5.40 per cent, but carries a downward bias due to the correction in crude oil prices. The report said the RBI would closely monitor incoming data to determine whether the price increase reflected temporary supply disruptions or more persistent inflationary pressures. The RBI's next Monetary Policy Committee meeting is scheduled to be held from December 2 to 4, 2026, according to the central bank's official calendar. (ANI)
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