Mumbai: Indian households could face continued pressure from rising food prices over the coming months, with ICICI Bank forecasting further inflationary risks and two interest rate hikes by the Reserve Bank of India (RBI).
According to a report, the bank expects the RBI to increase the repo rate by 25 basis points each in December 2026 and February 2027 to bring inflation closer to its target.
Retail Inflation Crosses 6%
India's retail inflation climbed to 6.08% in October from 5.54% in September, breaching the RBI's upper tolerance limit of 6%. Food inflation accelerated to 8.9% from 7.7%, while headline core inflation stood at 4.5%. The report highlighted that nearly 70% of food items experienced inflation exceeding 4%, signalling widespread price pressures.
Food Prices May Rise Further
ICICI Bank warned that cereals, pulses, coarse cereals and edible oils could face additional price increases. A weaker kharif harvest, reduced reservoir levels and inadequate soil moisture could affect the upcoming rabi crop. The bank expects food inflation to remain elevated over the next few quarters before easing in the second half of FY28.
Inflation Becomes Broad-Based
Inflationary pressure is spreading beyond food products. Around 53% of the weighted Consumer Price Index basket recorded inflation above 4%, compared with just 20% in March 2026. Core inflation excluding gold and silver increased to 3.8% in October from 3.2% in September. Higher input costs contributed to the increase in goods inflation.
RBI Policy Outlook
ICICI Bank revised its FY27 retail inflation forecast to 5.2% from 5.1%. For FY28, the bank raised its projection to 5% from 4.9%. Although moderating crude oil prices could provide some relief, persistent food inflation remains a concern.
The bank expects the RBI's Monetary Policy Committee to consider consecutive 25-basis-point increases in December and February. These remain forecasts rather than announced policy decisions.
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