Inflation tops RBI’s 6% ceiling, raises December rate hike prospects
Food inflation accelerated, prices rose across 11 of the 12 major CPI categories, prompting economists to forecast a 25-basis-point rate hike in December.
India's retail inflation hit a two-year high of 6.09% in October, surpassing the Reserve Bank of India's (RBI) 6% tolerance limit. This development has heightened expectations of another rate hike in December. Headline inflation has been consistently rising since November 2025, crossing the RBI's target of 4% in June. The latest figures, influenced by both food and non-food prices, align with predictions.
The overall consumer price index (CPI) increased by 6.1% in October, indicating a broad-based inflation trend, with food remaining the main driver. Food and beverages alone accounted for 37% of the CPI basket, with inflation soaring to 8.51% in October, up from 7.36% in September. Core inflation, excluding food and fuel, stood at 4.6%.
The Monetary Policy Committee (MPC) has projected headline CPI inflation at 5.2% for the fiscal year, with quarterly projections of 6% and 5.7% for December 2026 and March 2027. Economists anticipate a rate hike of 25 basis points at the December policy meeting, due to rising inflation expectations and broader price pressures.
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