More Stories

Informist, Friday, Jun. 12, 2026

By Shweta

NEW DELHI – The CPI inflation in May was projected to be the first print that would show the impact of the war in West Asia on retail prices in India, with economists seeing headline inflation rising to the Reserve Bank of India's medium-term target of 4%. The actual print was a shade lower, at 3.93%, reflecting some passing on of the increase in fuel prices in May but still far from concerning.

Retail inflation is expected to trend higher from here on, but the lower-than-expected prints for April and May mean the June quarter inflation is likely to undershoot the RBI's revised higher forecast of 4.2%. For headline inflation to be in line with the RBI's forecast, inflation would have to rise to 5.1%-5.3% in June, which would be higher than economists' current projection for the month.

Economists see retail inflation in June to be around 4.5-5%, higher than the RBI's 4% target but still well within the tolerance band of 2-6%. Inflation is seen rising in June, despite the statistical effect of a high base, because of higher food prices typical of the summer months and the full reflection of the over INR 7 per-litre increase in retail petrol and diesel prices, economists said.

The June CPI inflation data will be the last available to the RBI's Monetary Policy Committee before its next meeting in August. While the rate-setting panel is widely expected to raise interest rates in the financial year 2026-27 (Apr-Mar), a rate hike in August would become less probable if the June quarter inflation is lower than the RBI's projection, economists said.

"The bar should be low for (the rate hike in) August. Some steps will be taken in the upcoming meetings. Our base case for a rate hike is October. But for August, there are low expectations," Abhishek Upadhyay, co-head, economics and fixed income research, at ICICI Securities Primary Dealership, said. "It is still early to say about a rate hike as we have limited forward-looking data."

Last week, the Monetary Policy Committee left the repo rate unchanged at 5.25% and the stance neutral, even as the RBI lowered its growth forecasts and raised inflation projections for FY27 due to the impact of the West Asia war.

According to economists polled by Informist, after the rate-setting panel's policy decision, an interest rate hike is widely expected in FY27 but not in August. Twelve of the 20 economists polled by Informist said they expect the rate-setting panel to hold the repo rate at 5.25% on Aug. 5. The other eight see a 25-basis-point increase in the repo rate in August.

After the release of inflation data Friday, most economists said they see a rate hike only in the December quarter, when more data would be available on the inflationary impact of higher energy prices and the southwest monsoon, which is expected to be below normal.

"Continued weakness in monsoon progress could delay planting of summer-sown crops like rice, cotton, soybeans and pulses," Soumya Kanti Ghosh, group chief economic adviser, State Bank of India, said in a report. "Thus, while the overall inflation remains contained within the RBI range, going forward, the inflation outlook will depend significantly on geopolitical developments, global energy prices, exchange rate movements, spatial distribution of monsoon and the evolution of supply-chain conditions and hence we do not expect a rate change in August as of now."  End

Edited by Rajeev Pai

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2026. All rights reserved.