India's CPI remains manageable, RBI to keep policy accommodative

India's consumer price inflation (CPI) in September stood at 4.4% y/y, springing a modest downside surprise, despite recording a c.70bp uptick from the August print of 3.7% y/y. Inflation rate in India remains manageable. 

Overall, inflation remains well anchored and the current print, despite a poor monsoon and the waning of a favourable base effect. Core CPI in September ticked up to 4.1% y/y from 3.9% in August, but remains markedly benign. 

Additionally, given the persistent softness in commodity prices, it is believed a potential upside risks to the H2 FY15-16 inflation trajectory have softened materially in recent months, says Barclays. The RBI delivered an unexpectedly large 50bp cut in the repo rate in September, thereby lowering the repo rate to 6.75% from 8% at the beginning of the year. 

The RBI continues to emphasise that its future actions will remain data dependent even though the central bank remains explicit about its "accommodative" bias.