Ahead of the CPI numbers, Indian markets were trading on a negative note with Sensex shedding over 85 points or 0.26% trading at 33,229.60 and Nifty giving away 40 points or 0.38% trading at 10,282.05 at 1305 hours.
Food and beverage prices edged up slightly from 1.76 per cent in September to 2.26 per cent in October.
However, on a year-on-year (YoY) basis, the CPI inflation last month was lower than 4.20 per cent recorded in October 2016. Inflation in rural areas was 3.4%, while in urban centres it stood at 3.8%.
Urjit Patel governor of RBI said, "It is important to recognise near- and medium-term risks to the inflation outlook".
The price rise in services appear to have been impacted by the implementation of GST as most services are taxed at 18 per cent compared to 14.5 per cent under the previous service tax regime. Housing inflation is expected to continue to rise over the rest of this fiscal, printing between 7.0-8.0 per cent, exerting upward pressure on inflation.
This uptick in prices reduces further chances of a rate cut by the Reserve Bank of India in its monetary policy review meet in December. "Overall, we expect the CPI inflation to cross 4.0% in the ongoing quarter and exceed 4.5% in March 2018". "Additionally, the HRA revision at the state level may have a similar impact as that at the central government level, on the housing inflation", she said. "With inflation unlikely to see moderation during October".
The increase in the CPI inflation in October 2017 was quite broad-based, led in part by an unfavourable base effect, a surge in inflation for vegetables and a rise in price levels for eggs and milk.