India Consumer Prices (August 2026)

India’s headline consumer price inflation jumped to a 20-month high of 4.8% y/y in August and further rises are going to follow, with the renewed surge in oil prices a stark reminder that the risks are heavily stacked to the upside. As such, we remain comfortable with our view that the RBI will begin hiking interest rates in October. 

Consumer price inflation rose from 4.5% y/y in July to 4.8% y/y in August, in line with our forecast. This pushes it further above the RBI’s 4% target to its highest since December 2024. The rise in the headline rate was driven primarily by a further pick up in food price inflation, from 5.5% y/y in July to 6.0% y/y in August. An unfavourable base and weak monsoon rainfall on account of El Niño weather conditions point to further rises in food inflation over the coming months. Fuel price inflation held steady last month, reflecting the fact that administered prices weren’t adjusted. But the renewed surge in global oil prices as a result of the worsening situation in the Middle East – Brent crude is up 3% today – leaves open the prospect of further pump price hikes. Finally, core inflation edged up to 4% y/y. Excess banking liquidity and rising household inflation expectations are reasons to think that underlying inflation will rise over the coming months too.   

The RBI left interest rates unchanged at its meeting last month, but with inflationary pressure building, we think the central bank will kick off a hiking cycle in the next MPC meeting in October. In all, we are forecasting 75bps of hikes to the repo rate this cycle, taking it to 6.00% in the first half of 2027. That is a more hawkish view than the majority of forecasters.