October inflation reaches 6.09% as economists expect a December rate hike

India’s October retail inflation reached 6.09%, exceeding the Reserve Bank of India’s 6% Q3 forecast and its upper tolerance limit. At least six economists expect the RBI to raise the repo rate by 25 basis points at its December policy meeting, although they said the central bank must weigh the effect of further tightening on economic growth if price pressures remain largely supply-driven.

October inflation reaches 6.09% against the RBI’s 6% Q3 forecast

Consumer Price Index data showed that retail inflation stood at 6.09% in October. The Reserve Bank of India had forecast a peak of 6% for inflation in the third quarter of the fiscal year.

The October reading also exceeded the RBI’s upper tolerance limit of 6%, according to the central bank’s stated inflation framework.

Food inflation, measured by the Consumer Food Price Index, rose to 8.94% in October from 7.74% in September, Consumer Price Index data showed.

Inflation reached at least 4% in 19 of the 43 Consumer Price Index sub-groups in October, the data showed.

Economists weigh another 25-basis-point increase against growth

At least six economists expect the RBI to raise the repo rate by 25 basis points at the December Monetary Policy Committee meeting.

Dipti Deshpande, principal economist at Crisil, said the committee was expected to retain its tightening bias and that another 25-basis-point increase was possible in December.

Economists said the RBI must weigh the effect of further monetary tightening on economic growth if inflation remains largely driven by supply-side factors.

Madhavi Arora, chief economist at Emkay Global Financial Services, said 25-basis-point increases were expected in December 2026 and February 2027.

The RBI raised its policy rate to 5.5% in October

The RBI’s October decision took the policy rate to 5.5%, marking its first rate increase in three years, according to the central bank.

The RBI also changed its policy stance from neutral to “caliberated tightening” at the October review.

RBI Governor Sanjay Malhotra said there would be no interest-rate cuts in the near term, with policy decisions limited to rate increases or keeping the policy rate steady.

Garima Kapoor, deputy head of research and economist at Elara Capital, said inflation was unlikely to cool immediately despite lower crude-oil prices.