India's consumer price inflation rose for the ninth consecutive month in July, reaching 4.45%, up from 4.38% in June. This increase has strengthened market expectations that the Reserve Bank of India (RBI) will raise its benchmark interest rate later this year.

The headline inflation figure slightly undershot the 4.50% consensus forecast from a Reuters poll of economists. Data released on Monday by India's Ministry of Statistics and Programme Implementation revealed that food inflation climbed by 5.5% in July, while inflation linked to private passenger and freight transport both surged past 7%.

Earlier this month, the RBI kept its benchmark rate unchanged, diverging from several Asian central banks that have chosen to hike rates to counter inflationary pressures from Iran-related conflicts disrupting global energy supply chains. As the world's fastest-growing major economy, India is particularly vulnerable to supply disruptions from the ongoing conflict. The South Asian nation relies on imports for nearly 85% of its energy needs and is heavily dependent on the Strait of Hormuz for energy transport.

Following a series of attacks on ships in the Red Sea and Gulf of Oman, growing concerns over risks to global shipping lanes have pushed international crude oil prices higher, approaching $90 per barrel on Wednesday. RBI Governor Shaktikanta Das noted that while headline inflation has breached the 4% policy target, core inflation remains "benign."

He also highlighted that India's economic growth is showing resilience but faces significant uncertainty due to factors such as the southwest monsoon, El Ni帽o conditions, geopolitical tensions, and global trade policies. The RBI projects that headline inflation will peak in the quarter ending December, with core inflation following a similar trajectory.

Based on this outlook, markets anticipate the central bank will begin hiking rates by year-end. In a report released last Wednesday, Morgan Stanley predicted that the RBI will start a rate-hiking cycle in December, cumulatively raising the policy rate by 75 basis points to a terminal peak of 6.0%. The international brokerage firm expects average inflation in India to reach 5% in the fiscal year ending March 2027, driven by stronger food inflation and rising input costs.