India's October retail inflation tops 6% and beats forecasts

what happened

Government figures released on Thursday showed annual retail inflation in India climbed to 6.09% last month, up from 5.54% in September, Reuters reported. Economists polled by the agency had expected 5.93%. The reading was the first above 6% in two years and pushed past the upper limit of the central bank's acceptable range.

The Reserve Bank of India aims for medium-term inflation of 4%, and officials accept deviations of up to 2 points in either direction.

Oxford Economics expects the peak to still lie ahead, as food costs keep rising and energy expenses feed into goods and services prices. It sees two more quarter-point RBI hikes, in December and February, although lower oil prices may ease the pressure.

why it matters

For markets, the overshoot raises the odds of tighter policy from the RBI, which tends to push Indian bond yields higher and can support the rupee. Some economists polled by Reuters now expect another rate hike as soon as December.

market impact

Indian bonds: rising odds of RBI rate hikes push yields higher, pressuring prices

• ▼Indian government bonds pressure down — expectations of further RBI rate hikes lift yields

tags

instruments