RBI revises retail inflation downward to 3.1% for FY26 from 3.7% projections of June

Mumbai (Maharashtra) [India], August 6 (ANI): The Reserve Bank of India (RBI) has revised its Consumer Price Index (CPI) inflation projection for the financial year 2025-26 downward to 3.1% for the financial year 2026 (FY26), a significant reduction from the 3.7 per cent forecast made in June.

While announcing the outcome of meeting of Monetary Policy Committee (MPC) RBI Governor Sanjay Malhotra said, "CPI inflation for the current year 2025-26 is now projected at 3.1 percent. This is down from 3.7 percent that we had earlier projected in June."

According to the RBI Governor, headline CPI inflation declined for the eighth consecutive month, reaching a 77-month low of 2.1 per cent in June. This sharp moderation was largely driven by a decline in food inflation, which recorded a negative print of -0.2% in June -- its first such reading since February 2019.

Notably, deflation in vegetables, pulses, and oilseeds played a central role in this downward trend, supported by improved agricultural activity and effective supply-side interventions.

The RBI Governor added that high-frequency indicators suggest softening of food prices will continue in July. Additionally, fuel group inflation eased for the second consecutive month, came at 2.6 per cent in June.

Core inflation, however, ticked up slightly to 4.4 per cent in June, from the 4.1 per cent to 4.2 per cent range recorded between February and May, largely due to a sustained increase in gold prices.

Governor Malhotra attributed the more benign inflation outlook to favourable base effects, healthy kharif sowing, adequate reservoir levels, and comfortable buffer stocks of food grains. The RBI now expects inflation to rise modestly to above 4% in the fourth quarter of this fiscal year and beyond, as base effects turn unfavorable and recent policy-induced demand pressures take effect.

Despite these anticipated pressures, core inflation is expected to remain moderately above 4 per cent throughout the year. The Governor also flagged weather-related shocks as a continuing risk to the inflation outlook.

In a unanimous decision the central bank has kept the repo rate unchanged at 5.5 per cent. The decision was announced by RBI Governor Sanjay Malhotra on Wednesday. (ANI)

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