Lower-than-expected September inflation does not signal an imminent policy rate cut

India’s benchmark CPI inflation softened to a near three year low of 6.5% y/y in September (Consensus: 7.0%), compared to 7.8% y/y in August. Meanwhile, wholesale price inflation (WPI) retreated to 2.4% y/y in September from 3.7% y/y in the previous month. The extended downtrend in CPI inflation was led by favorable base effects, lower food inflation and waning price pressures across service-oriented segments such as ‘transport and communication’ and ‘household requisites’. Core CPI inflation dropped sharply to 5.9% y/y from 6.8% y/y in August, pointing to weakening purchasing power in the economy.

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