The Reserve Bank of India (RBI) has adjusted its Consumer Price Index (CPI) inflation projection for the fiscal year 2026-27, trimming it to 5.0%. This marks a 10 basis point reduction from earlier estimates, following the latest Monetary Policy Committee (MPC) meeting led by Governor Sanjay Malhotra.
During the meeting, the MPC outlined its quarterly inflation expectations for FY2026-27: Q1 at 5.3%, Q2 at 4.7%, Q3 at 5.9%, and Q4 at 5.5%. This revised outlook underscores the central bank's unwavering commitment to fostering price stability within the Indian economy.
Current Inflation Dynamics
Recent data indicates that CPI inflation rose to 4.4% in June, after holding below the target for 16 consecutive months. Governor Malhotra noted that this figure was 30 basis points lower than initial projections. The primary drivers behind June's increase were higher costs in food, fuel, and certain fuel-sensitive services, such as restaurants.
Core inflation, which excludes volatile food and fuel prices, remained steady at 3.9% in both May and June, despite ongoing pressures from elevated input costs. When further refined to exclude precious metals, core inflation was even lower, fluctuating between 2.3% and 2.5% during the same two-month period.
Risks and Policy Stance
Looking ahead, the RBI acknowledged several significant risks to the inflation outlook. The potential impact of El Niño on rainfall distribution across the country remains a major concern. Furthermore, global oil prices continue to exhibit high volatility due to geopolitical developments, creating uncertainty for the near-term economic landscape.
Despite these challenges, the central bank expressed comfort in proactive supply management measures and sufficient crude oil stocks. While generalized inflationary pressures have been modest so far, the risk of second-round effects—where higher food, fuel, and other input prices translate into broader inflation—persists. In a related announcement, the RBI also confirmed that the repo rate would remain unchanged at 5.25%, maintaining its current monetary policy stance.