Research Report

The year-on-year (YoY) headline CPI inflation (base year: 2024) hardened to 5.5% in September 2026 from 4.8% in the previous month, slightly surpassing ICRA’s estimate (+5.4%). Barring personal care, social protection and miscellaneous goods and services, inflation in 11 of the 12 sub-divisions rose in September, with the food and beverage (F&B) segment alone contributing as much as 62 bps to the overall uptick of 72 bps in the headline print between these months. With the CPI inflation appearing set to cross the 6.0% mark in October 2026, the Monetary Policy Committee’s (MPC) recent rate hike seems prescient. While the monsoon turned out to be deficient, with inadequate replenishment of reservoirs clouding the outlook for rabi sowing, another rate hike in December 2026 seems quite certain. The CPI inflation is likely to average at ~6.0% in Q3 FY2027, with risks tilted to upside. Crude oil prices currently remain elevated, and their trajectory will keenly influence the likelihood and extent of further rate tightening in 2027.

• CPI inflation jumped to 5.5% in September from 4.8% in August: This is slightly higher than ICRA’s estimate (+5.4%) for the month. The upswing was largely led by the F&B division (to +7.4% from +5.7%).
  
• October CPI print set to cross 6.0%: Early data for domestic retail food prices for October 2026 points to persistent food inflation pressures despite some softening in sequential momentum.