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Inflation is expected to ease in the second half of FY27, supported by a favourable base effect and softer crude oil prices amid a potential resolution of the West Asia crisis, according to a report by Antique Stock Broking.
The report noted that crude oil prices could soften further as global supply is expected to outpace incremental demand amid rising inventories, potentially easing inflationary pressures in the coming months. However, the brokerage cautioned that inflationary pressures continue to intensify, with the headline consumer price index (CPI) rising to 6.1 per cent year-on-year in October 2026 from 5.5 per cent in September, marginally exceeding consensus expectations. "Food inflation has further increased from 7.7% YoY in the previous month to 8.9% YoY in Oct26 driven by multiple categories like fruits, vegetables, oil, sugar, meat and ready-made food," it further noted. As per the report, the share of the CPI basket experiencing inflation above the RBI's 4 per cent target has increased from around 16 per cent in January 2026 to nearly 53 per cent currently, which "underscores a growing risk of broad-based inflationary pressures." At the same time, the headline consumer price index (CPI) has inched higher from 5.5% YoY in Sep26 to 6.1% YoY in Oct26, which is marginally higher than consensus expectations. Among key commodities, potatoes, biscuits, tea leaves and fruit juices witnessed deflation, while elevated inflationary pressures were observed in onions, apples, refined oil, arhar/tur dal, rice, chicken, tea cups, cooked snacks and mustard oil. Meanwhile, core inflation edged up to 4.4 per cent year-on-year from 4.2 per cent in the previous month. Core inflation excluding gold and silver rose more sharply to 3.8 per cent from 3.2 per cent during the same period. At the same time, the report highlighted that crude oil prices have been on a downward trajectory following political mandates in the United States and Israel. At the time of reporting, Brent crude was trading at around USD 96.01 per barrel while crude oil was trading at around USD 88.56 per barrel. Despite expectations of easing inflation, the report cautioned, "Spatial and temporal distribution of the current south-west monsoon along with ongoing El Nio conditions pose risk to already elevated food inflation." The brokerage estimates another 25-50bps rate hike in the current tightening phase as "inflation is likely to cool off" due to "likely high base in 2HFY27 with softening of crude oil prices because of likely resolution of the West Asia crisis and crude oil supply likely to outstrip any incremental demand due to inventory build-up." However, "crude oil prices remain a key monitorable," as per the report. (ANI)
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