Retail inflation is expected to hold at 4.4% even as food prices climb

India's retail inflation likely held steady at 4.4 per cent in July 2026 despite a broad-based increase in food prices, according to a poll of 18 economists. The official figure is due on 12 August.

The reason prices rose but the rate did not is the base effect. Consumer Price Index inflation had eased from 2.3 per cent in June 2025 to 1.6 per cent in July 2025, and comparing this July against that unusually low month absorbs some of the current upward pressure.

Forecasts cluster between 4.3 and 4.6 per cent, with all but two economists expecting a marginal pick-up from the previous month. If the median estimate holds, it would be the second consecutive month above the Reserve Bank of India's 4 per cent medium-term target.

Underlying pressures look milder than the headline suggests. Core-core inflation, which strips out food, fuel and precious metals to show the trend in everything else, stood at 2.1 per cent in July, only marginally above 2 per cent in June. One economist described the upward pressure as largely contained to food and fuel.

Food is the swing factor, because it accounts for nearly 35 per cent of the CPI basket and is highly sensitive to monsoon-influenced supply conditions. Improved monsoon activity during July supported crop conditions but did little to ease near-term supply concerns, since the recovery was uneven across states and did not prevent food prices rising during the month.

Looking further out, recent monsoon rainfall and kharif sowing trends offer some comfort, though uncertainty remains about how the rest of the 2026 season performs.

At its August meeting the central bank lowered its full-year inflation forecast to 5 per cent from 5.1 per cent. It cut the second-quarter projection to 4.7 per cent from 5.1 per cent, kept the third quarter at 5.9 per cent, and nudged the fourth quarter up to 5.5 per cent from 5.4 per cent.

With inflation now expected to build more slowly than previously thought, at least through December, the Monetary Policy Committee has room to stay where it is. It held the policy repo rate at 5.25 per cent for a fourth consecutive meeting. Economists expect it to remain on hold, with policy data-dependent and carrying a mildly hawkish bias, on the view that food-led price pressure calls for watching rather than acting.