Inflation / Retail inflation climbs to 2-yr high of 6.09% in Oct, strengthening expectations of December repo rate hike: Economists

New Delhi, Nov 12: Economists on Thursday said India's retail inflation had climbed to a two-year high in October, reaching the upper end of the Reserve Bank of India's (RBI) tolerance band. The rise has strengthened expectations of a second consecutive repo rate hike in December.

Consumer Price Index (CPI)-based retail inflation rose to a provisional 6.09 per cent in October 2026, up from 5.54 per cent in September, indicating mounting price pressures, particularly in the food segment.

Food inflation, measured by the Consumer Food Price Index (CFPI), accelerated to 8.94 per cent in October from 7.74 per cent in the preceding month.

“With headline inflation yet to peak, compounded by an unfavourable base effect, the central bank's quarterly projection is likely to be revised higher. The data reinforces our expectation of a second successive rate hike in December,” said Radhika Rao, Senior Economist and Executive Director, DBS Bank.

According to the latest CPI data, rural inflation stood at 6.63 per cent, while urban inflation was recorded at 5.41 per cent in October 2026.

Food inflation remained elevated across both segments, at 9.09 per cent in rural areas and 8.68 per cent in urban areas, indicating that food-related price pressures were relatively broad-based.

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“The increase in retail inflation highlights the importance of closely monitoring food price developments. While inflation trends across individual categories remain varied, the food component warrants particular attention given its significance in the consumption basket”, said Anil Gupta, President, PHDCCI.

At the broader expenditure-group level, inflation stood at 10.06 per cent for restaurants and accommodation, while personal care, social protection and miscellaneous goods and services recorded a rate of 10.14 per cent.

Tanay Dalal, SVP, Business Economic Research at Axis Bank, said the inflation figures “increase the risk that policy rates may need to rise above the estimated neutral rate of 6 per cent”.

The Monetary Policy Committee (MPC) had unanimously voted to raise the policy repo rate by 25 basis points to 5.5 per cent on October 7.

Meanwhile, rising inflation in major economies has prompted central banks to adopt a more hawkish monetary policy stance. The US Federal Reserve also raised its benchmark interest rate by 25 basis points in September.

(IANS)