Inflation concerns persist as RBI tightens policy rates

India’s central bank reiterated its vigilance on inflation after the latest MPC gathering. Governor Sanjay Malhotra said food‑price inflation is gaining ground, with onions and sugar seeing sharp price jumps, while August’s overall inflation rose on both food and fuel components.

The RBI continues to monitor price expectations, corporate pricing behavior, core inflation trends and a suite of leading indicators to gauge future inflation dynamics.

To anchor inflation expectations, the policy repo rate was increased and related rates were adjusted – the standing deposit facility (SDF) now stands at 5.25 percent and both the marginal standing facility (MSF) and the bank rate are set at 5.75 percent.

Malhotra added that supply‑side pressures are likely to linger due to a weaker southwest monsoon, an El Nino episode, and volatile international oil markets. The bank projects CPI inflation at 5.2 percent for the year, with quarterly estimates of 4.9 percent in Q2, 6.0 percent in Q3 and 5.7 percent in Q4.

While domestic demand and investment remain strong, the RBI cautioned that global inflationary trends, high oil prices and geopolitical uncertainties could test policy effectiveness in the months ahead.