India's retail inflation rose to 5.54% in September, near the upper end of the central bank's 2%-6% tolerance band. Food inflation accelerated, and economists expect more rate hikes from the Reserve Bank of India.
India's retail inflation jumped to 5.54% in September, data showed on Monday. The figure sits near the upper end of the central bank's 2%-6% tolerance band, and the Iran war and weak monsoon-led price pressures are rippling through the economy.
The reading was marginally higher than the 5.4% forecast in a Reuters poll of economists. It was the fourth consecutive month above the RBI's 4% medium-term target and the highest level this year under the current series.
Food inflation rises to 7.74%
Food inflation rose to 7.74% in September from 5.97% in August, driven by higher prices of staples such as onion, ginger and garlic. Transport inflation climbed to 5.01% from 4.6% a month earlier.
Headline inflation stood at 4.83% in August. Base effects explain part of the jump, because last year's lower price levels make this year's inflation appear higher.
RBI has already moved on rates
Last week the RBI raised its benchmark repo rate by 25 basis points to 5.5%, its first increase in nearly four years. The central bank cited evidence of elevated inflation expectations and broadening price pressure. It last raised rates in February 2023.
Governor Sanjay Malhotra said headline CPI inflation is expected to average nearly 5.8% over the next three quarters. The RBI therefore raised its inflation forecast to 5.2% for fiscal 2027 from 5% earlier.
Economists expect further tightening
Economists see more rate hikes ahead. Oxford Economics' Alexandra Hermann Prasad expects two further 25 bps hikes, in December and February. Radhika Rao of DBS Bank expects the RBI to keep the door open for another hike in December 2026.
Garima Kapoor of Elara Securities sees another two hikes from the RBI this financial year.
Sources: Investing.com (Reuters), Investing.com (Reuters)
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