India's retail inflation surges to over 2% in August
What's the story
India's retail inflation rose to 2.07% in August, up from the eight-year low of 1.55% recorded in July. The rise is attributed to the waning impact of high base effects and a surge in food prices, which constitute almost half of the consumer price basket. A Reuters poll had predicted an increase to 2.10%.
Inflation outlook
RBI maintains FY26 inflation forecast at 3.1%
The Reserve Bank of India (RBI) has kept its full-year FY26 inflation forecast at 3.1%, down from the June estimate of 3.70%. The central bank expects the Consumer Price Index (CPI) to hit 4.9% in Q1 FY27, exceeding its medium-term target of 4%. This is due to anticipated food price volatility, particularly vegetable prices, which is expected to impact inflation in the last quarter of FY26.
Rate decision
MPC holds repo rate at 6.50%
During last month's Monetary Policy Committee (MPC) meeting, the RBI decided to keep the repo rate unchanged at 6.50%. The committee had also retained its neutral stance on the inflation outlook.
Food
Food inflation rises to -0.69% in August
Food inflation, which makes up nearly half of the CPI basket, rose to -0.69% in August from -1.76% in July. Meanwhile, the fuel prices slowed down to 2.43% in August from 2.67% in July. These changes highlight the complexities of India's retail inflation landscape as it navigates through fluctuating food costs and a slower increase in fuel prices, amid a challenging global economic environment marked by trade tariffs and geopolitical uncertainties.