November Inflation May Rise to 6.3%, Raising Prospects of December RBI Rate Hike: UBI Report

New Delhi, Nov 13 (KNN) India's 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 Union Bank of India (UBI) report.

“Our Nov print is currently tracking close to 6.30 per cent with an upward bias, though food price trends need close watch,” ANI reported, citing the report.

The bank expects the RBI to raise the repo rate by 25 basis points (Bps) to 5.75 per cent at its December 2-4 monetary policy meeting, with a further increase to 6 per cent possible in subsequent meetings. It also said a one-time 50-basis-point hike could not be ruled out.

“Overall, we see a 25bps hike in December, yet a ‘one and done for now’ 50bps may not be ruled out,” it added.

Food prices remain the main concern, with rabi sowing, weather conditions and supply normalisation likely to influence the inflation trajectory.

Mandi prices of cereals and pulses rose 2.50 per cent and 2.48 per cent, respectively, up to November 11, while sugar prices increased 5.02 per cent, the report said.

Inflationary Pressures Broaden

Headline consumer price index (CPI) inflation rose 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.

Core inflation, excluding auto fuels, also rose to 4.51 per cent in October from 4.33 per cent in September. Excluding precious metals, it increased to 3.78 per cent from 3.22 per cent, indicating that price pressures are extending beyond food.

For FY27, Union Bank's CPI inflation projection, based on crude oil prices of USD 90 per barrel, is broadly in line with the RBI's estimate of 5.40 per cent, but carries a downward bias following the recent correction in crude prices.

The report said the RBI would assess incoming data to determine whether rising prices reflect temporary supply disruptions or more persistent inflationary pressures.

(KNN Bureau)