August retail inflation raises chances of RBI rate hike in October, say economists
Economists suggest that rising retail inflation in India, reaching a 20-month high of 4.8%, increases the likelihood of an RBI interest rate hike in October. Factors such as rising food and fuel costs, alongside global monetary tightening, are driving this potential policy shift.
Why it matters
A rate hike would impact borrowing costs for Indian consumers and businesses, potentially slowing economic growth to curb inflation.
The 20-month-high retail inflation of 4.8% in August 2026 has significantly increased the probability of an interest rate hike by the Reserve Bank of India’s Monetary Policy Committee (MPC) in its next meeting in October, according to economists.
Inflation in August as measured by the Consumer Price Index (CPI) was driven up by rising prices in the food category, which saw inflation quicken to 5.7%. Rising food and fuel prices also meant that inflation in the ‘restaurant and accommodation services’ category rose to 8.4%.
According to economists at Emkay Global, there have been “material changes” to the global and domestic macroeconomic situation over the past few weeks that could lead the MPC to hike rates in October.
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