Analysts see inflation climbing further in coming months

Wholesale price index- inflation for September came in at a 10-month high of 7.81 per cent, slightly higher than the 7.73 percent according to the average of a poll by CNBC-TV18. The numbers make for grim reading.

Improvement in monsoon towards September had little impact on food inflation, though it declined slightly. Manufactured products inflation at 6.26 percent year-on-year, is the highest so far this calendar. And core inflation (manufactured products excluding food) at 5.56 percent is way above RBI's comfort levels. Most economists and market analysts have given up hope on the RBI cutting interest rates at its monetary policy review on October 30. And they see inflation rising further in the coming months before peaking out.

A synopsis of the outlook of various brokerages on inflation:

Anand Rathi:

We expect WPI inflation to reach 8.5 percent by December 2012 and start softening thereafter. Our April 2013 target for WPI inflation is 6.1 per cent. We expect no rate cut, although 25-basis point cut in cash reserve ratio (CRR) is likely on October 30.

Goldman Sachs:

Sequential pressure on headline and core WPI remain high. We continue to expect no rate action by the Reserve Bank of India on October 30.

CRISIL:

The recent appreciation in the rupee, if sustained, is likely to relieve some pressure off core inflation in the coming months. Given high fuel and food inflation, however, overall WPI inflation will continue to remain significantly above the RBI’s comfort level of 5 per cent for foreseeable future, making it difficult for the RBI to administer a repo rate cut on October 30.

Nomura:

Food inflation has remained tame thus far, but we expect food and overall WPI inflation to inch higher in the coming quarter due to the second-round effects of higher diesel prices. As such, we do not expect a repo rate cut on 30 October.

Emkay Global:

Inflationary pressures are likely to persist, given the impact of recently announced measures, which would reflect in higher cost implications for the economy, including both consumers and producers. A token rate cut (25 per cent probability) if announced would only reflect RBI relenting to do a balancing act in wake of the mounting pressure from the Finance Minister to ease rates.