What do latest updates on El Nino effect forecast for potential impact on weather patterns, inflation, prices, and other factors?
The report notes that the risk of rising core inflation is expected to increase, as companies may pass on a portion of the rise in input costs to consumers while demand remains steady.
(Representational image/AI generated)
New Delhi: According to a new report, there is an 80% probability of an El Ni o event occurring between June and August, and a 90% or higher likelihood that it will persist at least until November. However, water levels in the country's reservoirs currently exceed normal storage levels, and vegetable supply figures remain satisfactory. A research report by Bank of Baroda (BoB) notes that only the coming days will reveal whether the supply situation is robust enough to withstand inflationary pressures caused by sudden fluctuations in food and fuel prices.
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Key Takeaways From BoB Research Report
Economist Dipanwita Mazumdar projects the CPI inflation rate to range between 5.2% and 5.5% in the 2026-27 fiscal year.
This forecast factors in the potential impact of El Ni o and assumes an average crude oil price of $90 $100 per barrel.
In May 2026, headline CPI inflation stood at 3.9%, coming in lower than BoB Research's estimate of 4.1%.
However, this was higher than the 3.5% recorded in April; the rise was primarily driven by an uptick in food and fuel prices.
Food inflation rose to 4.8%.
Transport-related inflation increased due to the recent hike in petrol and diesel prices, while inflation in restaurant and accommodation services also saw an uptick.
Core inflation (excluding food and fuel) rose to 3.9%, signaling underlying price pressures.
Key Research Findings Regarding Weather And Inflation
BoB Research identifies an inflation risk stemming from high fuel prices and weather-related uncertainties specifically the potential impact of El Ni o on food prices. The report states that regarding food inflation, the impact of high fuel prices and a potential rise in freight costs could further drive up inflation in the near future. Therefore, it is crucial to closely monitor the 'second-round pass-through' effect (whereby rising costs eventually translate into higher prices), especially given the heightened weather-related risks this year.
Core inflation likely to rise: Report
The report further notes that the risk of rising core inflation is expected to increase, as companies may pass on a portion of the rise in input costs to consumers while demand remains steady. Risks associated with food inflation are also likely to escalate in the coming period.
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