The Reserve Bank of India (RBI) increased its benchmark repo rate by 25 basis points on Monday, a move that came as the consumer‑price index (CPI) rose to 5.5% in September, the highest level in nine months and the first time the new CPI series breached the 5% threshold.
Food prices pushed the CPI up, with overall food inflation reaching 7.7% in September compared to 6.0% in August. Onions leapt 108% year‑on‑year, garlic spiked 55% from 44%, and lemons surged 36%, while staples such as potatoes, tomatoes and lady’s fingers slipped 11%, 8% and 4.5% respectively.
Beyond food, war‑driven freight and fuel costs pushed transport services up 14.7% and restaurant services 9.4%. Rural inflation climbed to 6.1% against 4.9% in urban areas, with Andhra Pradesh, Karnataka, Tamil Nadu and Odisha reporting rates between 5.9% and 6.8%.
Madan Sabnavis, chief economist at Bank of Baroda, warned that the wholesale‑price‑index transmission to the CPI may still be lagging and that durable goods, FMCG and auto prices have already announced hikes. 'We expect inflation to peak around 6% in the third quarter,' he said, adding that the December policy meeting could see another rate rise.
Radhika Rao, chief economist at DBS Bank, echoed the sentiment, noting that the higher headline figures will likely keep the central bank in a position to raise rates again in December. For households, the double whammy of a higher repo rate and a food‑price surge means tighter budgets in the coming months.