INSTANT VIEW-India inflation jumps to 5.54% in September, strengthening case for further rate hikes

By Reuters News10:50 (UTC), 12 October 2026 Updated

Oct 12 (Reuters) - India's retail inflation INCPIY=ECI 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."