New Delhi, Oct 13 Consumer price inflation will moderate further in the coming months as the fresh harvest begins and seasonality adjustments to vegetable prices in Q3 become more pronounced, a report said on Monday.
A report from Bank of Baroda projected the CPI to settle at 2.8 per cent in FY26. "Core inflation has the usual gold-driven upheaval. Excluding gold and pan & tobacco, it is lower at 3.1 per cent," the report said.
The progressive pace of disinflation, seasonal harvest arrivals and sufficient reservoir levels are expected to contribute to a favourable food outlook, analysts noted.
CPI decreased in September, primarily due to ongoing food disinflation and lower vegetable prices, resulting in a headline figure slightly below the Reserve Bank of India’s Q2 forecast.
Only for clothing and footwear was some front-loading of festival demand seen in the sequential data, the bank said. For housing, some momentum was seen for the house rent and garage rent components, the report said.
Food inflation declined for the fourth straight month, showing a 2.3 per cent YoY drop. The BoB in-house ECI recorded (-)3.8 per cent in early October, indicating persistent disinflationary momentum.
"The major comfort came in from vegetables whose deflation has been the sharpest since February 25. Other than these oils & fats, fruits, pulses, and cereals showed some softening momentum," the bank noted.
However, the headline core, which includes gold, rose due to significant month-on-month fluctuations in international gold prices. “Going forward, we expect gold-driven volatility of core inflation to persist amidst global political and trade-related uncertainty. However, the broader comfort from GST will somehow negate the impact,” the report said.
Core services inflation was recorded at 3.4 per cent, with demand-sensitive categories like household goods and clothing exhibiting moderation. Fuel and light inflation eased to 2 per cent year-on-year, due to softening of kerosene prices.
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