India Consumer Prices (May 2026)

India’s headline consumer price inflation picked up to a 15-month high of 3.9% y/y in May and further rises are going to follow. We think the RBI will start hiking interest rates soon.

Consumer price inflation rose from 3.5% y/y in April to 3.9% in May. Though that is still a whisker below the RBI’s 4% target, it is also the highest inflation print since February 2025. The rise in the headline rate was driven by a jump in fuel inflation, following four separate hikes to pump prices last month as the government attempts to alleviate fiscal pressure. More price hikes could follow over the coming weeks.  

Meanwhile, food inflation rose last month to 4.5% y/y, from 4.2% in April. An unfavourable base, shortages of fertiliser and the prospect of crop damage as a result of the ongoing heatwave all point to further jumps in food inflation. Broader supply chain disruption is going to start pushing underlying inflation up too.

The RBI left interest rates unchanged at its meeting this month as it continues to “closely monitor developments” in the Middle East. But with inflationary pressure building, we think it is only a matter of time before the central bank begins a hiking cycle. We are forecasting 75bps of hikes to the repo rate this year, taking it to 6.00%. That is a more hawkish view than the majority of forecasters.