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Below the Quote on CPI data by Rahul Agrawal, Principal Economist, ICRA Ltd

"While the CPI expectedly hardened in May 2026 vis-à-vis the 3.5% seen in April 2026, it printed at a slightly lower-than-expected 3.9%, as against ICRA’s projection of 4.1% for the month. The uptick was entirely driven by the food and beverages, transport, restaurants, and personal care divisions, with the latter three reflecting the impact of the hike in prices of petrol and diesel, commercial LPG cylinders, and customs duty on gold and silver in the month.

The prices of most food items have firmed up on a sequential basis in June 2026, leading to a hardening in the YoY inflation rates as compared to the previous month. Besides, the price pressures across several non-food items are expected to intensify further in the ongoing month, amid the continued passthrough of earlier price hikes across transport and cooking fuels. Moreover, domestic LPG cylinder prices were raised by Rs. 29/cylinder in early-June 2026 which is also likely to exert some pressure on the headline CPI print in the month. Overall, ICRA expects the YoY CPI inflation to harden further to ~4.5% in June 2026.

ICRA expects the MPC to remain data and development dependent, amid sizeable risks to the growth-inflation outlook. While we believe that the next move on rates is likely to be a hike, its timing would depend on how geopolitical and macro developments, including the severity of the El Nino, transmit to a generalisation of inflationary pressures; the October and December 2026 policy meetings could be live for potential rate hike(s), after there is some clarity on the monsoon impact."

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