Headline CPI inflation accelerated to a 23-month high of 5.5% YoY in Sep-26, marking the fourth consecutive breach of the 4% target
Download ReportQuantEco Research | CPI Inflation | Sep-26 | A steeper climb ahead
India's inflation trajectory is entering a more challenging H2 FY27, with price pressures acquiring greater breadth, persistence and upside. Headline CPI inflation accelerated to a 23-month high of 5.5% YoY in Sep-26, marking the fourth consecutive breach of the 4% target, as food, fuel and core inflation climbed to their respective series highs (2022-23 base). The confluence of a deficient and geographically uneven Southwest monsoon, elevated energy costs and a progressive transmission of input-price pressures into consumer prices is increasingly shifting the inflation narrative from isolated supply-side disruptions towards a more generalized price impulse. Looking ahead, the prospect of a stronger El Nino, depleted reservoir levels, fading GST-related base effects and renewed geopolitical uncertainties could compound inflationary pressures through H2 FY27. Against this backdrop, we retain our recently revised FY27 CPI inflation forecast of 5.3%, with inflation expected to average around 6.0% in H2 FY27, compared with 4.4% in H1. The emerging inflation configuration strengthens the case for further monetary tightening, with our baseline anticipating cumulative repo rate hikes of 50 bps over the Dec-26 and Feb-27 MPC reviews, alongside a residual risk of additional tightening should external shocks intensify.