New Delhi, November 13: India’s retail inflation surged to a two-year high in October 2026, raising concerns over rising household expenses and strengthening expectations of another repo rate hike by the Reserve Bank of India (RBI) in December.
Consumer Price Index (CPI)-based inflation climbed to 6.09% in October from 5.54% in September, crossing the RBI’s upper tolerance limit of 6%.
Food Prices Fuel Inflation
Food inflation accelerated to 8.94% in October from 7.74% in September, emerging as a major contributor to rising consumer prices.
Rural inflation reached 6.63%, significantly higher than urban inflation of 5.41%.
Food inflation stood at 9.09% in rural areas and 8.68% in urban regions, highlighting widespread pressure on household budgets.
Restaurants and accommodation recorded inflation of 10.06%, while personal care and miscellaneous services registered 10.14%.
December Rate Hike Likely?
Economists believe persistent inflation could force the RBI to tighten monetary policy further.
Radhika Rao, Senior Economist and Executive Director at DBS Bank, said headline inflation had yet to peak, while unfavourable base effects could push the central bank’s inflation projections higher.
She expects a second consecutive repo rate increase in December.
Meanwhile, Tanay Dalal, Senior Vice-President, Business Economic Research at Axis Bank, warned that rising inflation could push policy rates beyond the estimated neutral level of 6%.
RBI Faces Tough Policy Choice
The RBI’s Monetary Policy Committee unanimously raised the repo rate by 25 basis points to 5.50% on October 7.
Another increase in December could take the benchmark lending rate to 5.75%, potentially making loans costlier for borrowers.
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Anil Gupta, President of PHDCCI, emphasised the need to monitor food prices closely, given their significant weight in household consumption.
With inflation exceeding the RBI’s tolerance ceiling, the December policy meeting will be closely watched for signals on interest rates and inflation management.
