Rising food prices to push India October inflation to 7-month high

BENGALURU, - India's retail inflation is forecast to have sped up to a seven-month high in October, led by a rebound in food prices as unexpected rains destroyed crops, a Reuters poll found, diminishing the chances of further interest rate cuts.

A majority of the Reserve Bank of India's Monetary Policy Committee voted to keep rates steady last month on worries rising consumer prices would threaten the central bank's medium-term inflation target of 4 percent.

The latest poll supports that decision, with the consensus of over 30 economists putting consumer price inflation at 3.46 percent in October from a year ago, up from 3.28 percent in September.

Inflation will be at its highest since March if the data, due to be released on Nov. 13 at 1200 GMT, matches expectations.

"Headline CPI is expected to pick up due to increase in vegetable prices driven by unseasonable rain in October," said Shashank Mendiratta, economist at ANZ.

Still, that was probably offset slightly by a fall in fuel prices after the Finance Ministry announced a tax cut on petrol and diesel costs.

But rising commodity prices globally and a new pay revision for government employees could be inflationary in coming months.

While growth in Asia's third-largest economy has slowed this year, the RBI was forecast to keep rates on hold until at least mid-2019 on rising inflation concerns, a separate Reuters poll showed.

"We do not see room for monetary policy accommodation, with inflation now on a rising trajectory and also on calibrated tightening by global central banks," wrote Teresa John, economist at Nirmal Bang, in a note to clients.

Major central banks globally have shifted their bias away from easy monetary policy even though inflation has not risen significantly.

The latest poll also predicted wholesale prices rose 3.01 percent last month from a year ago, compared to 2.60 percent rise in September.