Societe Generale’s Kunal Kundu expects India’s September 2026 headline CPI inflation to jump to 5.6% year-on-year from 4.8% in August, driven by a broad-based food shock and rising energy costs. Core CPI is seen approaching 4.5%, suggesting strengthening underlying pressures. Kundu warns that real policy rates will remain negative even after the RBI’s October rate hike, implying further tightening may be needed.

Food and energy shocks deepen risks

“We expect India’s September 2026 headline CPI inflation to rise sharply to 5.6% yoy, from 4.8% in August, led by food inflation which likely rose to around 7.5% yoy.”

“A broad-based food shock is more persistent and carries a greater risk of feeding into household inflation expectations than a temporary increase in vegetable prices.”

“The immediate CPI impact will depend on the extent of domestic fuel-price adjustments.”

“We also expect core CPI inflation to approach 4.5% yoy, indicating that underlying price pressures are strengthening despite relatively subdued mass-market demand.”

“With headline inflation approaching the upper tolerance threshold, core inflation rising and the inflation shock becoming increasingly broad-based, the RBI may need to tighten policy further to restore a meaningfully positive real rate and contain the risk of second-round price effects.”

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)