New Delhi, Nov 12 (IANS) Economists on Thursday said India's headline inflation tested the upper end of the RBI's tolerance band in October to a two-year high, which reinforces the expectation of a second successive repo rate hike in December.

The Consumer Price Index (CPI)-based retail inflation increased to 6.09 per cent (provisional) in October 2026, compared with 5.54 per cent in September 2026, reflecting an increase in 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.

“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, restaurants and accommodation recorded inflation of 10.06 per cent, while personal care, social protection and miscellaneous goods and services registered 10.14 per cent.

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

The monetary policy committee voted unanimously to increase the policy repo rate by 25 basis points to 5.5 per cent on October 7. Acceleration of inflation in key economies has prompted a shift towards hawkish monetary policy. The US Fed hiked by 25 bps in September.

--IANS

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