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August Inflation Rise Puts RBI Rate Hike In Focus
Prices in India rose faster in August than they did in July.
The main measure of household inflation reached 4.82%.
Food became more expensive, with food inflation reaching 5.95%.
Prices charged by wholesalers and producers also increased.
This has made people watch the Reserve Bank of India’s October meeting closely.
Some economists think the bank may raise interest rates to slow price increases.
India’s economy grew strongly, which may make a rate increase more likely.
The United States is also expected to consider raising its interest rate.
India’s consumer inflation rose to 4.82% in August from 4.45% in July, driven partly by higher food prices.
Food inflation increased to 5.95%, while wholesale inflation rose to 9.92% from 9.78%.
Output producer-price inflation edged up to 9.81% from 9.57%, although input producer prices fell month-on-month.
The inflation data has increased attention on the Reserve Bank of India’s October 5-7 Monetary Policy Committee meeting.
Economists have warned that stronger-than-expected economic growth and spreading price pressures could prompt interest-rate increases in India and the United States.
- Who
- The Ministry of Statistics and Programme Implementation, the Reserve Bank of India’s Monetary Policy Committee, and economists including Rahul Agrawal and Brian Martin.
- What
- India reported higher consumer, wholesale, and output producer-price inflation in August, increasing expectations of possible interest-rate hikes.
- Where
- India, with related interest-rate expectations also discussed for the United States.
- When
- The data was released on Monday; the Reserve Bank of India’s next policy meeting is scheduled for October 5-7.
- Why
- Food and fuel prices pushed inflation higher, while strong economic growth and concerns about broader price pressures increased expectations of monetary tightening.
Key facts
- August CPI inflation
- 4.82%, up from 4.45% in July
- August food inflation
- 5.95%
- August wholesale inflation
- 9.92%, up from 9.78% in July
- August output PPI inflation
- 9.81%, up from 9.57% in July
- RBI inflation target
- 4%, with a permitted band of 2%-6%
- RBI policy rate
- The repo rate was held at 5.25% at the previous meeting
- India’s first-quarter growth
- GDP growth was 7.8% in the first quarter of fiscal 2026-27
Quotes
Rahul Agrawal
Principal Economist at ICRA
“We expect food inflation to harden further in September-October on the back of an unfavourable base, as well as the stronger-than-usual sequential hardening in prices of some food items such as sugar, which could sour sentiment during the festive season.”
indianexpress.com
ANZ economists led by Brian Martin
Economists at ANZ commenting on the expected US Federal Reserve rate path
“We recently changed our fed funds (rate) view to forecast a mini 75 bps tightening cycle. We had pencilled in December for the start of that but acknowledged that poor September inflation data could see the cycle start earlier. This is now the case.”
indianexpress.com
Sources
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