Inflation in India exceeds 6% in October and enhances interest rate hike expectations

The rate of consumer price inflation in India rose to 6.09 percent last October, exceeding the upper limit of the Reserve Bank of India's target range of 6 percent, for the first time, according to the new data series, with rising food prices and their pressure on household budgets, which has strengthened expectations of further increases in interest rates.

Economists polled by Reuters had expected inflation to rise to 5.93 percent in October, compared to 5.54 percent in September.

The rise was mainly driven by food prices, which constitute about 40 percent of India's consumer price index.

Food inflation rose to 8.94 percent in October, compared to 7.74 percent in September, with prices of basic commodities, such as onions, garlic and ginger, increasing.

Inflation has remained above the Reserve Bank of India's medium-term target of 4 percent for five consecutive months, although it last exceeded the upper limit of 6 percent during October 2024, when it recorded 6.2 percent, according to the previous CPI series, which was based on 2012 prices.

Radhika Rao, chief economist and CEO of DBS Bank, said: “These data reinforce our expectations of a second successive increase in interest rates during December,” adding that general inflation has not yet reached its peak.

The rise in inflation last month prompted the Reserve Bank of India to join its global counterparts in raising the main interest rate, known as the repo rate, for the first time in about four years, based on rising inflation expectations and the widening scope of price pressures.

The minutes of the Monetary Policy Committee meeting showed that further increases in interest rates may be necessary to contain inflation, but monetary policy makers avoided supporting a sharp monetary tightening cycle, due to the risks that may face economic growth.

The key interest rate currently stands at 5.50 percent, following the recent increase.

The Reserve Bank of India expects inflation to average 6 percent during the quarter extending from October to December, and it also raised its expectations for the inflation rate during the current fiscal year to 5.2 percent, compared to its previous estimate of 5 percent.

Bank Governor Sanjay Malhotra warned that the weak rainy season and the intensification of the El Niño phenomenon may pose risks to the agricultural sector and demand in rural areas, although the abundance of food grain stocks and government measures are expected to limit the impact of these factors.

On the other hand, Brent crude futures fell to about $92 per barrel, which provides some support for inflation expectations, at a time when markets are balancing between hopes of reducing the escalation in the war between the United States and Iran, and fears of attacks on shipping traffic in the Strait of Hormuz.

Transport cost inflation also accelerated to 5.84 percent in October, compared to 5.01 percent a month ago.

During October, inflationary pressures extended to a wider range of components of the price index, as 19 subgroups, out of 43, recorded inflation at 4 percent or more, compared to 14 groups during September.

Aside from food prices, the rise in inflation was driven by increased costs of transportation, clothing, housing, and catering services.

“Inflation is likely to remain above 6 percent until June 2027,” said Tinai Dalal, economist at Axis Bank. “These numbers increase the risk that interest rates will have to exceed the estimated neutral level of 6 percent.”

Anthropic is preparing to go public, in a move that could raise its market value to $1.4 trillion, in the latest indication of Wall Street's continued appetite for investing in artificial intelligence.

The company specializing in developing artificial intelligence, known mainly for the chatbot “Cloud,” along with some of its investors, seeks to raise up to $64.4 billion by selling 825 million shares, at a price of up to $78 per share, according to Reuters.

The company also intends to raise an additional $26 billion through a separate private placement deal, with the participation of major investors. Among them are Google, a subsidiary of Alphabet, Nvidia, and Advanced Micro Devices.

SpaceX recorded the largest initial public offering in the history of the United States, with a value of $75 billion last June, surpassing the previous major offerings of Alibaba, Visa, and Facebook, currently known as “Meta Platforms.”

The owners of Anthropic are moving forward with IPO plans, despite the recent wave of decline witnessed in the technology sector, in light of investors’ questions about the potential returns from artificial intelligence technologies, and the impact of high borrowing costs.

“The timing of the offering is particularly important, as investors have become more focused on the costs of expanding artificial intelligence infrastructure, compared to the past few years,” said Ipek Ozkardiskaya, senior analyst at Swissquote Bank.

She added: “Political and regulatory uncertainty, coupled with rising interest rates, has also raised questions about future spending on artificial intelligence. As a result, many investors see the launch of Anthropic as an important test of the market’s appetite for investments related to artificial intelligence.”

China called on the United States, on Thursday, to accelerate the implementation of an agreement to reduce reciprocal customs duties on goods with a total value of $60 billion. With the aim of creating better conditions for agricultural trade between the two countries, at a time when diplomatic contacts between Beijing and Washington have intensified before an upcoming summit bringing together the two presidents. Xi Jinping and his American counterpart, Donald Trump, next week.

The Chinese invitation coincided with discussions between the foreign ministers of the two countries that discussed the possibility of expanding the dialogue to include issues of peace and nuclear disarmament, amid discussions about holding a possible tripartite meeting including Russian President Vladimir Putin, on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit.

Chinese Ministry of Commerce spokesman He Yadong said during a press conference that his country hopes that the United States will cooperate with it to ensure that customs duty reduction arrangements enter into force as soon as possible.

He explained that the step would help provide a better environment for trade in agricultural products, noting the continuation of close communications between the two sides regarding the mechanisms for implementing the agreement.

Last week, the Chinese Ministry of Commerce announced Beijing's readiness to increase its purchases of American agricultural products, but linked this to the implementation of agreed-upon arrangements to mutually reduce duties.

The arrangements include reducing duties on goods worth $30 billion from each side, equivalent to $60 billion in trade exchanges between the two countries.

The agreement comes as part of broader efforts to stabilize trade calm, after relations between the two countries witnessed a mutual escalation in customs duties during the year 2025, before reaching understandings to reduce tension during the APEC summit hosted by South Korea last year.

In parallel with the trade file, US Secretary of State Marco Rubio held a phone call with his Chinese counterpart, Wang Yi, ahead of the APEC summit on November 18 and 19 in the Chinese city of Shenzhen.

The US State Department said that the call, which took place at the request of the Chinese side, discussed the importance of holding talks at the leadership level to advance common goals, including peace and nuclear disarmament.

She added that the two ministers agreed on the importance of these talks, including during any potential tripartite meeting bringing together the leaders of the United States, China, and Russia.

Officials from the three countries indicated that there were discussions about the possibility of holding a meeting between Trump, Xi, and Putin on the sidelines of the summit, without final confirmation of its holding.

On Sunday, Trump expressed his expectation that the Chinese and Russian presidents would meet to discuss ways to end the war with Iran.

The nuclear disarmament discussions come after Washington called on China to join new arrangements to limit nuclear weapons, following the end of a bilateral treaty with Russia last February.

Beijing had refused to participate in disarmament negotiations at the time, justifying its position that the size of its nuclear arsenal differed from the capabilities possessed by the United States and Russia.

Raising the issue again reflects Washington's desire to expand the scope of the strategic dialogue, so that it is not limited to bilateral relations with Moscow, but also includes Beijing.

For his part, Wang Yi stressed during the call China's readiness to enhance communication and cooperation with the United States, according to a statement issued by the Chinese Ministry of Foreign Affairs.

He stressed the importance of dealing appropriately with differences and sensitive issues, noting that the stability achieved in bilateral relations came after difficult efforts.