India October CPI inflation rises to 6.09%, food inflation accelerates to 8.94%

India CPI Y/Y 6.09% vs 5.93% expectedPrior 5.54%Full reportIndia's CPI rose to 6.09% y/y in October, according to provisional data, pointing to increased price pressures in the economy. The headline inflation rate was higher in rural areas, where prices increased by 6.63% y/y, compared with 5.41% in urban areas.Food inflation was a big standout, with the Consumer Food Price Index rising 8.94% y/y in October.

Food price increases were relatively broad-based across the country, with rural food inflation reaching 9.09% and urban food inflation standing at 8.68%.The figures highlight the significant contribution of food prices to India's inflationary pressures, with food inflation running well above the headline CPI rate. Overall, the October report points to a challenging inflation environment for the Reserve Bank of India.

Given the acceleration in inflation, the market is pricing in a 69% chance of a 25 bps hike at the next RBI meeting, with 31% probabilitiy of a larger 50 bps move. The US-Iran war has been a major contributor of inflation through higher crude oil prices, increasing India's import bill and raising transportation, energy and agricultural production costs.As a major oil importer, India is particularly vulnerable to prolonged disruptions in the Middle East.

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