India’s retail inflation accelerated to 4.82 percent in August from 4.45 percent in July, reaching an eight month high as higher food prices continued to put pressure on household budgets. The latest Consumer Price Index reading also moved further above the Reserve Bank of India’s medium term inflation target of 4 percent.

CPI based inflation has remained above the RBI’s target for three consecutive months, rising from 3.93 percent in May to 4.38 percent in June, 4.45 percent in July and 4.82 percent in August. The August reading is the highest recorded in the eight months for which inflation data are available under the new CPI series with 2024 as the base year.

The latest inflation reading assumes significance for monetary policy as it will be the final retail inflation data available before the RBI Monetary Policy Committee meets from October 5 to 7. September inflation data are scheduled to be released on October 12, after the policy meeting.

At its August meeting, the MPC unanimously kept the repo rate unchanged at 5.25 percent and retained its neutral policy stance. The committee indicated that future policy decisions would depend on developments in the growth and inflation outlook.

Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank, said headline inflation was in line with expectations and estimated that average inflation for the second quarter of FY2027 could be around 20 basis points above the RBI’s 4.7 percent estimate. She also pointed to the possibility of further monetary tightening amid liquidity measures and adverse global conditions, with the probability of an October rate action increasing.

Food prices remained the biggest source of pressure in August. Consumer Food Price Index inflation increased to 5.95 percent year on year from 5.52 percent in July. Rural food inflation was higher at 6.13 percent, while urban food inflation stood at 5.64 percent.

The acceleration was also more pronounced in rural areas. Rural CPI inflation rose to 5.23 percent in August from 4.84 percent in July, while urban inflation increased to 4.31 percent from 3.96 percent.

Within the food basket, onion prices recorded a sharp increase, with inflation more than doubling to 48.27 percent in August from 22.54 percent in July. Garlic inflation rose to 43.60 percent from 35.36 percent, while ginger prices remained particularly elevated, with inflation at 73.82 percent.

Some vegetables provided a partial offset. Tomato prices declined 31.09 percent year on year, while potato prices fell 13.14 percent in August.

Price pressures were also visible beyond food. Inflation in restaurants and accommodation services stood at 8.38 percent, while transport inflation was 4.60 percent. Personal care, social protection and miscellaneous goods and services recorded inflation of 15.17 percent. Precious metals also continued to have a significant impact on selected categories. Silver jewellery inflation stood at 107.11 percent in August, while prices of gold, diamond and platinum jewellery were 35.53 percent higher than a year earlier.

The combination of elevated food inflation, higher rural price pressures and persistent services inflation could complicate the RBI’s assessment of the inflation growth balance ahead of its October policy meeting.