NEW DELHI, INDIA – 2025/11/19: Various fresh vegetables displayed at a street market in Old Delhi. People are shopping for produce, with more stalls visible in the distance. (Photo by Frank Bienewald/LightRocket via Getty Images)
Frank Bienewald | Lightrocket | Getty Images
India’s consumer price inflation continued to climb for the ninth month in a row to 4.45% in July, up from 4.38% in June, firming up prospects of the country’s central bank raising interest rates later this year.
However, the headline inflation number was marginally below economists’ expectations for a 4.50% rise, according to a Reuters poll.
India’s food inflation rose 5.5%, while personal transport and goods transport inflation rose above 7% each in July, India’s Ministry of Statistics and Program Implementation said in a Monday release.
Earlier this month, India’s central bank kept benchmark interest rates unchanged in contrast to many of its Asian peers, who hiked rates to tackle inflationary headwinds caused by the disruption of global energy supply chains amid the Iran war.
India, the world’s fastest-growing major economy, is among the countries most vulnerable to the supply disruptions caused by the war. The South Asian country imports nearly 85% of its fuel needs and relies on the energy supply chain through the Strait of Hormuz.
Deadly attacks on vessels in the Red Sea and Gulf of Oman heightened concerns over risks to global shipping routes and sent global oil prices higher to around $90 per barrel on Wednesday.
Sanjay Malhotra, the governor of the Reserve Bank of India, said that headline inflation had moved above its target of 4%, but added that core inflation has been “moderate.”
But he added that while India’s growth has been resilient so far, the outlook is “hazy” due to the uncertainties from the southwest monsoon, El Nino, geopolitics, and global trade policy. The RBI expects headline inflation to peak in the quarter ending December, with core inflation showing a similar trend.
As a result, it is expected that the central bank will start raising rates towards the end of the year.
Morgan Stanley, in a report last Wednesday, said it expects the RBI to hike rates starting in December “to deliver a cumulative 75bp [basis points] of rate hikes, taking the policy rate to a terminal level of 6.0%.”
The global brokerage expects India’s headline inflation to average 5% in the financial year ending March 2027, driven by “firmer food inflation” and higher input prices.
