Oct 12 (Reuters) – India’s retail inflation jumped to 5.54% in September, data showed on Monday, nearing the upper end of the central bank’s 2%-6% tolerance band and strengthening the case for further rate hikes as the Iran war and weak monsoon-led price pressures ripple through the economy.
The September print was marginally higher than economists’ 5.4% forecast in a Reuters poll, marking the fourth consecutive month inflation has remained above the Reserve Bank of India’s 4% medium-term target and its highest level this year under the current series.
COMMENTARY:
ALEXANDRA HERMANN PRASAD, LEAD ECONOMIST, OXFORD ECONOMICS, LONDON
“Today’s print reinforces the case for more interest rate hikes. The RBI last week clearly demonstrated a willingness to change tune quickly as inflation – and inflation upside risks – continue to rise, even as underlying demand pressures still remain soft overall.
But with headline inflation clearly continuing to trend up and evidence for price pressures broadening continuing to mount, we expect two further 25 bps hikes, in December and February.”
RADHIKA RAO, SENIOR ECONOMIST, DBS BANK, SINGAPORE
“Food inflation continued to quicken, driven by a broader set of sub-segments, in midst of below-normal rainfall, imported price pressures and fuel-derivative push. Non-food components are likely to feel the impact of upcoming pass through of higher fuel costs.
Core gauge aligns with the central bank’s view that price risks are no longer benign. In the face of higher headline prints, we expect the RBI to keep the door open for another rate hike in December 2026.”
GARIMA KAPOOR, DEPUTY HEAD OF RESEARCH & ECONOMIST, ELARA SECURITIES (INDIA), MUMBAI
“CPI inflation came in line with expectation as higher food and energy prices continued to feed into broader metrics. Amid continued stickiness in commodity prices, and rising global yields, we expect the RBI to continue to remain firmly on the path of rate hikes. We see another two hikes from the RBI this financial year.”
GAURA SENGUPTA, CHIEF ECONOMIST, IDFC FIRST BANK, MUMBAI
“The rise in CPI inflation reflects a combination of adverse base effects and rise in food inflation. Core inflation remains moderate, indicating that a majority of the inflation pressures are on the supply side.
Full-year CPI inflation is tracking at 5.2% in FY27, with upside risk from food and fuel. Core inflation is also expected to rise as producers pass on input cost pressures to consumers. We continue to expect terminal repo rate at 6.0 to 6.25%.”
UPASNA BHARDWAJ, CHIEF ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI
“The headline CPI inflation came in line with expectations. We continue to see the inflation trajectory trending higher above 6% through the next few months as adverse base effects and food price shocks play out.
The RBI’s revised inflation estimates remain realistic. We expect additional 50 bps of repo rate hike, with upside risks likely if geopolitical risks do not subside.”
SAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM
“Inflation rose by 70 bps in September on the back of higher food inflation, visible in rising onion prices as well as other food items like sugar, milk and cereals.
We expect inflation to print closer to 6% in the next release and for the full year to stand at 5.4% as second-round effects of higher oil prices and uneven monsoons raise inflationary pressures. The RBI is expected to hike policy repo rate by 25 bps in December again.”
MADHAVI ARORA, CHIEF ECONOMIST, EMKAY GLOBAL, MUMBAI
“The September CPI print is in line with our estimates, with the increase driven by food prices, while core-core inflation momentum has likely risen further. We expect 3Q FY27 inflation to average close to 6.1%, implying the real policy rate would stay negative even with higher rates.
We reckon that beyond oil-related input costs, adverse weather is adding to food price pressures, with El Niño potentially persisting into 2027. Meanwhile, core inflation is likely to rise in H2 on base effects, with second-round pressures an added risk as higher energy and commodity costs feed into output prices.
But against the backdrop of fluid and volatile global conditions, we remain watchful and retain our call for 75 bps of cumulative hikes in this cycle, with another 25 bps each in December 26 and February 27.”
VIKRAM CHHABRA, SENIOR ECONOMIST, 360 ONE ASSET, MUMBAI
“The rise in food inflation drove the sharp pickup in CPI inflation to 5.54% YoY in September 2026.
We expect inflation to inch close to 6% by end-2026, with upside risks stemming from poor kharif yields following a deficient south-west monsoon. The outlook for 2027 remains clouded by low reservoir levels, which could weigh on rabi output. Further, if energy prices stay elevated, their pass-through to broader prices will follow with a lag.
Against this backdrop, we are pencilling in another 50 bps of rate hikes by the RBI in this cycle.”
(Reporting by Sai Keerthi, Payel Das, Anuran Sadhu, Abinaya V, Anushka Rajvedi, Nishit Navin, Kashish Tandon and Surbhi Misra in Bengaluru; Compiled by Abinaya V; Editing by Sonia Cheema)
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