Retail inflation soars to 2-year high of 6.09%, crosses RBI’s upper limit

Onion recorded the steepest price rise among the five items with the highest inflation, at 116.22 per cent.

Consumer Price Index (CPI) inflation for the month of October soared to 6.9%, crossing the Reserve Bank of India (RBI’s) tolerance threshold. The central bank is mandated to maintain retail inflation in the 2-6% range, with 4% as the ideal target. Retail inflation accelerated to 6.09% in October from 5.54% in September, according to government data released on Thursday. Inflation was higher in rural areas at 6.63%, while the urban rate was 5.41%.

Inflation data decoded

Food inflation, calculated using the All India Consumer Food Price Index (CFPI), reached a provisional 8.94% in October 2026 from a year earlier. The corresponding rates were 9.09% in rural areas and 8.68% in urban areas. Onion recorded the steepest price rise among the five items with the highest inflation, at 116.22 per cent. Garlic prices increased 60.74 per cent, followed by silver jewellery at 52.39 per cent, ginger at 48.32 per cent and lemon at 47.30 per cent. Retail inflation has moved above the RBI's upper tolerance limit of 6 per cent for the first time in two years. The central bank's mandate requires it to keep inflation within a band of 2-6 per cent. The last time retail inflation crossed this threshold was in October 2024, when it stood at 6.25 per cent. The October inflation figures will be an important input ahead of the Reserve Bank of India's monetary policy committee meeting scheduled for December 2-4. In October, the RBI raised its benchmark policy rate by 0.25 per cent to 5.50 per cent, marking its first increase in nearly four years. The central bank also indicated that further hikes could be on the table as inflation rises, the rupee remains weak and crude oil prices stay elevated. Reacting to the data, Garima Kapoor, Deputy head of Research & Economist at Elara Securities India said, “CPI inflation came in line with our expectations as food inflation firmed and its pass-through was evident across the board. Notwithstanding the cooling of crude oil prices amid expectations of peace in West Asia, inflation is unlikely to cool off immediately as pass-through of previous hikes continues. We expect RBI to hike rates by another 50 bps over next 6 to 9 months. ” Radhika Rao, Senior Economist at DBS Bank told Reuters, “India's headline inflation tested past the upper end of the RBI's tolerance band in Oct to a two year high, with a sharp food driven upmove accompanied by signs of broadening out of price pressures on sequential basis. With headline inflation yet to peak, compounded by an unfavourable base effect, the central bank's quarterly projection is likely to be revised higher. The data reinforces our expectation of a second successive rate hike in December.”