New Delhi: The Reserve Bank of India (RBI) on Wednesday raised its retail inflation forecast for 2026-27 to 5.2 percent from 5 percent, warning that price pressures were spreading across food items and a wider section of the consumer basket.

Announcing the October monetary policy, RBI Governor Sanjay Malhotra said a deficient southwest monsoon, El Nino conditions and volatility in international oil prices would keep near-term inflation under pressure.

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"Price pressures are increasingly becoming visible across a range of commodities within the food component, apart from oil," he said.

The Monetary Policy Committee (MPC) unanimously raised the repo rate by 25 basis points to 5.5 percent and shifted its stance from ‘neutral’ to ‘calibrated tightening’.

Malhotra said rising core inflation and price increases across a larger segment of the consumer price index (CPI) basket indicated that inflation was becoming more generalised.

The RBI projected retail inflation at 4.9 percent in the second quarter, 6 percent in the third and 5.7 percent in the fourth quarter of 2026-27. Inflation for the first quarter of 2027-28 is estimated at 5.6 percent, with risks evenly balanced. Core inflation is projected at 4.4 percent for the current fiscal.

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Retail inflation increased to 4.8 percent in August from 4.5 percent in July, largely driven by food and fuel prices.

"Food price increases have become more broad-based along with notable spikes in certain items such as sugar and onion," Malhotra said.

Fuel inflation also edged up in August, mainly because of unfavourable base effects. Core inflation excluding precious metals rose to 2.9 percent.

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