Driven by a surge in precious metals and ticking food prices, retail inflation based on Consumer Price Index (CPI) rose to 4.4 per cent in June as against 3.9 per cent of May, government reported on Monday. This is the first time since January 2025 when headline numbers have crossed 4 per cent mark.

The June print stands as the highest reading under the new 2024-base CPI series, which was introduced in January this year. Looking ahead, analysts note that the trajectory of retail inflation will hinge on the progress of the monsoon, global geopolitical uncertainties, and their compounding pressure on crude oil and the rupee. Consequently, while the Monetary Policy Committee (MPC) is expected to hold rates steady during its August review, a rate hike remains on the table for the second half of the fiscal year.

“June numbers underline three key developments – firstly, the full impact of crude prices pass-through after petrol and diesel prices were hiked from mid-May; secondly, continued upward trajectory of food prices due to rain shortfall; and thirdly, households mixed discretionary spending,” said Megha Arora, Director with India Ratings & Research (Ind-Ra).

Pricey food

India Inc has urged policy intervention to contain rising food prices following the latest inflation data. Commenting on the print, PHDCCI President Rajeev Juneja noted that while headline inflation remains within the Reserve Bank of India’s comfort zone, the June spike was predominantly driven by costlier food items. He cautioned that persistent food price pressures demand sustained policy attention.

The general expectation is that the headline number will trend upward but remain largely range-bound. “Over the next two quarters, inflation is likely to remain range bound at 4-4.5 per cent, with food as the key swing factor amid uneven monsoon progress and El Niño-linked rainfall variability. Upside risks stem from a potential crude rebound and sustained bullion strength, while a favourable monsoon could ease food prices and support continued RBI accommodation,” said Rajeev Sharan, Head of Research at Brickwork Ratings.

According to Sujan Hajra, Chief Economist at Anand Rathi Wealth Limited, food inflation remains vulnerable to near-term weather risks, including the potential impact of El Niño on agricultural output. While headline inflation has now breached the RBI’s 4 per cent medium-term target, it remains comfortably within the central bank’s broader 2–6 per cent tolerance band. “Given the evolving inflation dynamics, we expect the MPC to remain watchful and maintain a data-dependent approach before taking any further policy action,” Hajra said.

Aditi Nayar, Chief Economist with ICRA, expects the MPC to maintain status quo on the policy rate in its upcoming meeting in August 2026. While the material easing in crude oil prices has reduced the likelihood of an early rate hike, the renewal of tensions in West Asia warrants some caution. “More clarity is needed on the monsoon turnout, which would only be available later during the monsoon season. Consequently, any rate hike(s) is likely to be back ended in the fiscal,” she said.

Published on July 13, 2026