July 13 (Reuters) – India’s retail inflation accelerated to 4.38% in June, government data showed on Monday, breaching the central bank’s 4% target for the first time in 17 months and setting the stage for an interest rate hiking cycle.
The print was above the 4.3% forecast in a Reuters poll of economists and was also the highest since India revamped the consumer price index in January.
COMMENTARY:
SAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM
“Inflation inched up by close to 45 basis points in June to 4.4%, mainly driven by some increase in food and fuel inflation as the impact of a revision in petrol and diesel prices played out. However, lower gold prices pulled down the increase in the headline print.
The uncertainty over the West Asia conflict along with an uneven monsoon continues to cast a shadow over the inflation outlook. We continue to estimate inflation to average at 5.2% for FY27, assuming an average oil price of $80 pbl.”
UPASNA BHARDWAJ, CHIEF ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI
“The inflation data continues its uptrend, with much of the increase being led by higher food prices and partial impact of the pass through of the fuel price hike. We continue to monitor the progress on rains and the likely uptick on food prices, alongside the recent revival in geopolitical tensions. We continue to expect 50 bps of rate hike in H2 FY27.”
VIKRAM CHHABRA, SENIOR ECONOMIST, 360 ONE ASSET, MUMBAI
“Despite the June 2026 inflation print coming in above market expectations, the inflation outlook has become more benign over the past month. This has been supported by a sharper-than-expected decline in crude oil prices, while early July rainfall has partially offset the steep June monsoon deficit.
That said, the inflation trajectory remains vulnerable to surprises, given the ongoing risk from the West Asia conflict and the monsoon still tracking below normal. Our base case currently expects inflation to average around 5% in FY27, which should give the RBI room to remain on pause at the August policy meeting and await greater clarity on the growth–inflation trade-off before deciding its next move.”
RADHIKA RAO, SENIOR ECONOMIST, DBS BANK, SINGAPORE
“June inflation was slightly above consensus, on continued normalisation in food segments and pass-through of increase in pump prices undertaken in mid-May.
Markets are also focused on the spatial and geographical spread of ongoing southwest monsoon. While policymakers will remain vigilant to weather and geopolitical risks, the lack of discernible spillovers to demand should limit any market tendency to frontload rate hike expectations.”
DIPTI DESHPANDE, SENIOR DIRECTOR AND PRINCIPAL ECONOMIST, CRISIL LTD, MUMBAI
“India’s retail inflation crossed the 4% mark for the first time since January 2025, with Consumer Price Index (CPI) inflation rising to 4.4% in June from 3.9% in May.
Looking ahead, uneven rainfall so far, a below-normal monsoon forecast, and the onset of El Niño conditions could put pressure on food prices.
Crisil Intelligence also expects Brent crude prices to average $82–87 per barrel this fiscal. Higher domestic fuel prices are also likely to exert broader inflationary pressure as rising input and transportation costs are passed through the economy.
It is also important to note that the disinflationary support from GST rationalisation measures is likely to persist only until the end of the current quarter.
Given these pressures, Crisil expects CPI inflation to firm up over the coming months and average 5.1% this fiscal, compared with 2.0% last fiscal.”
APOORVA JAVADEKAR, CHIEF ECONOMIST, MUTHOOT FINCORP LTD, MUMBAI
“CPI firmed up to 4.38%, with rural region exhibiting stronger inflationary momentum. Upside inflationary risks are more severe from here on. Though the country received strong rains in the first week of July reducing the deficit to 15%, the second week disappointed with rain deficit widening to 18%.
An 8% spike in crude prices last week on the backdrop of escalating Iran-U.S. tensions does not bode well for producer inflation, and eventually on consumer inflation, as most FMCG companies have started a 5-7% pass-through to everyday products. We expect a sizable jump, both for consumer and wholesale inflation hereon.”
ADITI NAYAR, CHIEF ECONOMIST, ICRA, GURUGRAM
“The CPI inflation in June 2026, the first full month after the hikes in petrol and diesel prices, accelerated to 4.4%, slightly higher than our forecast of 4.3%, led by the food and beverages, transport, and restaurants divisions.
In addition to food items, the non-food component may also exert pressure on the headline CPI print in the month, partly owing to the pass-through of higher fuel prices into prices of other items. Overall, ICRA expects the YoY CPI inflation to harden to ~4.6% in July 2026 from 4.4% in June 2026.
ICRA expects the MPC to maintain status quo on the policy rate in its upcoming meeting in August 2026.”
SHILAN SHAH, DEPUTY CHIEF EM ECONOMIST, CAPITAL ECONOMICS, LONDON
“India’s headline consumer price inflation picked up to an 18-month high of 4.4% y/y in June and further rises are going to follow over the coming months. We think the RBI will start hiking interest rates before long, perhaps as soon as the MPC meeting in August.
An unfavourable base and deficient monsoon rainfall on account of El Niño weather conditions point to further rises in food inflation over the coming months. We think the headline rate will peak at 6% later this year.
In all, we are forecasting 75 bps of hikes to the repo rate, taking it to 6.00% by early 2027. That is a more hawkish view than the majority of forecasters.”
NAMRATA MITTAL, CFA, CHIEF ECONOMIST, SBI MUTUAL FUND, MUMBAI
“June 2026 CPI inflation edged higher to 4.38% y-o-y from 3.94% in May, exceeding the consensus expectation of 4.20%. The increase was broad-based, with pressure visible across food inflation, fuel inflation and core inflation.
Looking ahead, July inflation is currently tracking around 4.5-4.6%. We expect CPI inflation to cross 5% by August-September and move closer to 6% by December.
Weather-related risks also remain a key uncertainty. Global food prices, particularly wheat, soybean, cotton and rice, have risen meaningfully on a year-to-date basis. Moreover, we had already anticipated some normalisation in Indian food prices after the unusually subdued price environment witnessed last year. As a result, we estimate FY27 CPI inflation at around 5.2%.
While the RBI is likely to maintain the status quo in its August policy meeting, we continue to assign a probability of a cumulative 50 bps rate hike during the second half of FY27.”
RAJEEV SHARAN, HEAD OF RESEARCH, BRICKWORK RATINGS, BENGALURU
“India’s headline CPI inflation rose to 4.38% in June 2026 from 3.93% in May, still within the RBI’s tolerance band but marking a third straight month of acceleration.Geopolitical tensions and earlier crude oil volatility added to imported cost pressures, though this effect now appears to be moderating.
Food inflation climbed to 5.32%, driven by sharply higher ginger and tomato prices, even as potatoes and peas stayed in deflation. Core inflation stayed relatively contained at around 4%, supported by soft housing and health inflation.
Over the next two quarters, inflation is likely to remain range bound at 4-4.5%, with food as the key swing factor amid uneven monsoon progress and El Niño-linked rainfall variability. Upside risks stem from a potential crude rebound and sustained bullion strength, while a favourable monsoon could ease food prices and support continued RBI accommodation.”
(Reporting by Aleef Jahan, Surbhi Misra, Saikeerthi, Chandini Monappa, Nishit Navin and Anuran Sadhu, compliled by Abinaya V; Editing by Sonia Cheema)
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