Rate Hike Fears Loom: Brokerages Flag Inflation Risks As India's CPI Climbs To 14-Month High In March

The government on Monday released India's Consumer Price Index (CPI)-based inflation or retail inflation data, which saw a 3.4% year-on-year uptick in the month of March 2026. This was broadly in line with analyst estimates, with inflation standing at 3.21% in the preceding month.

Despite the marginal uptick, the retail inflation continues to remain within the RBI's medium-term target of 4%.

To put things into perspective, the retail inflation in January and February stood at 2.75% and 3.21%, respectively, as per data combined under the new CPI series, where the base year was moved to 2024 from 2012.

Meanwhile, India's March CPI food inflation stood at 3.87%, up from 3.47% in February. Inflation for the food & beverages segment stood at 3.71%.

Core inflation, which excludes the volatile food and fuel prices, was steady at 3.3%, whereas urban inflation rose to 3.11% from 3.02% in February. Similarly, rural inflation also went up to 3.63% in Feb from 3.37% in February. 

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In the wake of India's CPI data release, a slew of brokerages have offered their view on the economy, notably flagging the rate cut risk.

Brokerages on CPI

BofA

• Prices broadly contained with limited pass-through
• CPI Details: Food prices higher, service prices contained
• WPI to see higher pass‑through of commodity price increases
• Pass-through on inflation is likely to come with a lag
• Continue to expect CPI at 5.2% for FY27
• Continue to expect a 50bps hike starting December 2026

Kotak Securities

• Climate and geopolitical risks are weighing on inflation
• Expect RBI to remain on a prolonged pause in CY2026
• FY27 CPI estimated at 4.7%
• See the chances of a rate hike arising under significant upside risks to the medium-term inflation trajectory

Citi

• Headline inflation reached a 14-month high
• Revise FY27 headline inflation forecast to 4.6%
• Continue to believe that the RBI can stay on hold for the immediate future
• Risk of a modest upward adjustment to the policy rate will arise if core inflation stays elevated above ~4.5% due to supply shocks

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