Retail inflation rises to 5.54% in September: Experts warn of pressure on purchasing power, expect more RBI rate hikes

Retail inflation rose to 5.54% in September 2026, up from 4.83% in August, according to data released by the Ministry of Statistics and Programme Implementation (MoSPI) on Monday. The inflation rate, measured by the Consumer Price Index (CPI) with the new base year of 2024, stood at 6.08% in rural areas and 4.88% in urban areas.

Retail inflation rises to 5.54% in September

Food inflation, measured by the Consumer Food Price Index (CFPI), increased to 7.74% in September from 5.97% in August. Food inflation stood at 8.06% in rural areas and 7.18% in urban areas, indicating continued pressure on household food budgets.

Among items recording high inflation, onion prices saw the sharpest increase, with inflation rising to 108.09% in September from 48.78% in August. Silver jewellery inflation stood at 87.80%, while ginger and garlic recorded inflation rates of 62.85% and 54.62%, respectively. Lemon prices also saw a sharp rise, with inflation reaching 36.41%. In contrast, potato prices continued to record deflation at 11.50% in September, compared with 13.15% in August. Tomato prices fell by 8.62%, while inflation in motor cars and jeeps stood at -4.51%. Lady's finger and coconut also recorded deflation of 4.48% and 3.99%, respectively.

Among major states, Madhya Pradesh recorded the highest combined retail inflation at 6.68%, followed by Odisha at 6.70% and Puducherry at 6.86%. Delhi's combined inflation stood at 3.40%, while Uttar Pradesh recorded 6.08% and Maharashtra 5.18%.

The CPI data are provisional for September 2026. MoSPI said the next retail inflation data, for October 2026, will be released on November 12, 2026, or the next working day if that date is a holiday.

What experts say

Garima Kapoor, Deputy Head of Research and Economist at Elara Capital, says CPI inflation came in line with expectations as higher food and energy prices continued to feed into broader metrics, adding that the RBI may hike rates. "Amid continued stickiness in commodity prices and rising global yields, we expect the RBI to continue to remain firmly on a path of rate hikes. We see another 2 hikes from the RBI this financial year," she says.

Furthermore, Dr V K Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, says that rising prices could reduce people's purchasing power, weaken consumer demand and force the RBI to increase interest rates further.

"September CPI inflation print at 5.54% came on expected lines. This is in line with RBI's forecast for Q3 CY2026. Rising crude oil prices, escalating food prices triggered by the poor monsoon and imported inflation arising from a depreciating rupee are the principal factors driving inflation. High inflation will certainly impact people's purchasing power, which, in turn, will impact rural demand, too. FMCG demand is likely to be impacted. The RBI will have to go for two more rate hikes in this rate-hiking cycle unless crude prices fall steeply," adds Vijayakumar.