India’s retail inflation rose to 5.5% in September from 4.8% in August, according to HSBC, with price pressures becoming more broad-based. The bank said that if the next few readings stay elevated, the case for further Reserve Bank of India rate hikes will strengthen and could also offer some support to the rupee.
HSBC currently expects CPI to average around 6% in the fourth quarter of 2026 and forecasts a 25 basis point rate hike at the December policy meeting, with the risk of one more hike later.
The September print was in line with expectations. On a seasonally adjusted basis, sequential momentum remained high at 0.7% month-on-month. Rural inflation continued to run ahead of urban inflation at 6.1% versus 4.9%.
HSBC highlighted that inflation is gradually spreading across the basket. Its weighted diffusion index showed that about 45% of the CPI basket is now rising above the RBI’s 4% target, up from 37% in August. Non-food goods inflation rose to 5.8%, while services inflation, which had earlier helped keep the headline low, has also started to pick up more clearly.
Food remained the main driver. Sequential food inflation stayed elevated at 1.2% month-on-month, led by higher vegetable prices. Sugar, fruits, edible oils, cereals and milk also posted strong gains. Around 60% of food components are now rising above 4%. Energy inflation stayed relatively benign, with administered fuel prices unchanged.