India July inflation accelerates to 4.45%, unlikely to alter RBI rate outlook

NEW DELHI: India’s annual retail inflation accelerated to 4.45% in July on higher food prices, against 4.38% a month ago, a pace that’s unlikely to push the central bank to change its outlook on raising interest rates.

The July print was nearly in-line with a Reuters poll of economists, which had estimated inflation at 4.50%, and marked the second consecutive month in which inflation breached the Reserve Bank of India’s 4% medium-term target.

The central bank left its benchmark repo rate unchanged at 5.25% last week, as policymakers awaited clearer evidence on whether inflationary pressures had become broad-based in Asia’s third-largest economy.

India’s food inflation climbed to 5.52% in July from 5.32% in June, on the back of weak monsoon showers, but it is expected to soften with a slight recovery in the rains in August that could mitigate further price pressures from the impact of El Nino.

Fitch affirms India rating on robust growth, flags youth job risks to fiscal profile

RBI Governor Sanjay Malhotra said that headline inflation has moved above target mainly because of higher fuel prices, while broader price pressures remained in check at the central bank’s last monetary policy announcement earlier this month. The central bank also cut its inflation forecast for 2026/27 by 10 basis points to 5% at that meeting.

India’s state-run fuel retailers raised petrol and diesel prices four times in May in response to rising costs due to the U.S.-Iran war. While a brief pause in the conflict pushed global crude prices lower, they were still about 20% above pre-war levels.

Economists said that while the price of crude oil was volatile during the month, the absence of any meaningful revision in domestic retail fuel prices is expected to limit the pass-through to consumers.

Still, transport inflation accelerated to 4.43% in July from 4.31% in June.