Consumer price index (CPI)-based inflation rate edged up to 3.77 per cent in September from 3.69 per cent the previous month, remaining below the Reserve Bank of India's (RBI) target of 4 per cent.

Though the figure justifies RBI's stance on status quo in the policy rate, at least from the inflation point of view, economists believe that oil prices, exchange rate and higher procurement prices would put pressure on the central bank to hike rates in its December review.

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In fact, food prices in urban areas kept falling, though at a lower rate than in August. Deflation narrowed to 0.22 per cent from 1.21 per cent over this period in these areas. Food inflation, on the other hand, declined to 0.94 per cent in rural ares from 1.14 per cent in this period.

This may sound good to the middle class, but not to the farmers who are already in distress. The higher MSP may give some relief to them. If inflation does not rise even then, it would mean that supply of agricultural produce is adequate.

Economists, however, do not think so.

“The rise in crude oil prices, the sharp weakening of the rupee, and the revision in MSPs are likely to push up the headline inflation above 4% in the ongoing quarter," Aditi Nayar, principal economist with Icra, said.

She said these risks, combined with the change in RBI's stance from neutral to calibrated tightening, suggest a likely rate hike in the December 2018 policy review. "At present, we expect further rate hikes of 25-50 bps in the remainder of FY2019," Nayar said.

Within food items, pulses, vegetables and sugar saw decrease in prices.

Inflation rate in fuels remained stagnant at 8.47 per cent. This may see some easing after the government cut excise duty on petrol and diesel by Rs 1.5 a litre, and oil marketing companies took a one-rupee-a-litre hit. Some states also cut duties.

Core inflation rate, which measures price rise in manufactured items sans food products and is widely tracked by policy makers, inched down to 5.8 per cent from 5.9 per cent during this period.

Economists said the moderation in the core CPI inflation rate in September 2018 was largely led by the base-effect led easing in housing inflation.

Housing inflation rate fell to 7.07 per cent from 7.59 per cent.