India’s inflation has climbed for the ninth consecutive month, driven by food and fuel prices, prompting speculation over potential interest rate hikes by the Reserve Bank of India amid global energy concerns.
India’s inflation edged higher for a ninth straight month in July, adding to pressure on the Reserve Bank of India as it weighs when to begin tightening policy. Consumer prices rose 4.45% from a year earlier, up from 4.38% in June, the Ministry of Statistics and Programme Implementation said on Monday. The reading was just below a Reuters poll forecast of 4.50%, but still above the central bank’s 4% medium-term target.
Food remained a major driver of the increase, with food inflation at 5.5% in July, while personal transport and goods transport costs each climbed by more than 7%, the ministry said. That persistence in price pressure is significant for India, where households spend a large share of income on essentials and fuel-related costs tend to feed quickly into broader inflation.
The Reserve Bank of India left its benchmark rate unchanged earlier this month, even as several Asian central banks moved to tighten policy to offset inflation risks linked to disruption in global energy supply chains. The RBI has said headline inflation has moved above target, though governor Sanjay Malhotra said core inflation remains moderate. He also described the growth outlook as hazy because of uncertainties around the southwest monsoon, El Niño, geopolitics and global trade policy.
India remains especially exposed to higher oil prices because it imports nearly 85% of its fuel needs and relies heavily on shipping routes through the Strait of Hormuz. Deadly attacks on vessels in the Red Sea and Gulf of Oman have lifted concerns over global trade flows and pushed crude prices towards $90 a barrel. Morgan Stanley said last week it expects the RBI to start raising rates in December and deliver 75 basis points of increases in total, taking the policy rate to 6.0%. The brokerage said it expects inflation to average 5% in the fiscal year ending March 2027, helped by firmer food prices and higher input costs.
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