Monetary Policy Transmission
WPI to CPI Pass-Through
Understanding when and how wholesale price increases transmit to retail prices is central to monetary policy. The RBI's MPC targets CPI, but watches WPI as a leading indicator of inflationary pipeline pressure. The "pass-through" depends on: competitive conditions in retail markets, the margin absorption capacity of distributors, and whether the input cost increase (captured in WPI) is in categories that have significant weight in CPI (e.g., food, fuel, manufactured goods). In January 2026, the RBI maintained its neutral stance with rates at 5.25%, but the rising WPI added to the data points the MPC monitors.
- RBI inflation target: CPI 4% ± 2% (2-6% band) under the flexible inflation targeting framework
- MPC February 2026 decision: Repo rate held at 5.25% (neutral stance); CPI projected at 2.1% for FY26 full year
- WPI as leading indicator: WPI changes typically precede CPI by 1-3 months in manufacturing and processed food categories
- Cost-push vs demand-pull: WPI-led inflation is typically cost-push (supply-side); CPI-led without corresponding WPI rise is typically demand-pull
- The RBI monitors "core inflation" (CPI excluding food and fuel) to gauge underlying demand pressure
● Tracked since February 16, 2026 · last seen August 05, 2026 · updates as the daily brief publishes
05 Aug '26
RBI holds policy rates while raising growth forecast; cuts inflation projections
Economics
18 May '26
WPI inflation crossing 10% mark not a tail risk but a near-term base case: Report
Economics
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