The Monetary Policy Committee says that headline inflation for 2025-26 is now projected at 2.1 per cent with Q4 at 3.2 per cent
As consumer price index (CPI) inflation during November-December remained below the tolerance band, Sanjay Malhotra, Governor, Reserve Bank of India (RBI) has stated that the near-term domestic inflation and growth outlook remain positive.
The RBI Monetary Policy Committee (MPC) noted that Nnear-term outlook suggests that food supply prospects remain bright on the back of healthy kharif production, sufficient buffer stocks of foodgrains, favourable rabi sowing and adequate reservoir levels. Core inflation, barring potential volatility induced by prices of precious metals, is expected to be range-bound. Geopolitical uncertainty coupled with volatility in energy prices and adverse weather events pose upside risks to inflation.
“In terms of the headline inflation trajectory, despite the anticipated momentum being muted, unfavourable base effects stemming from large decline in prices observed during the fourth quarter of 2024-25 would lead to an uptick in YoY inflation in Q4 of 2025-26. Considering all these factors, CPI inflation for 2025-26 is now projected at 2.1 per cent with Q4 at 3.2 per cent. CPI inflation for Q1:2026-27 and Q2 are projected at 4 per cent and 4.2 per cent, respectively,” the Governor added.
In view of the impending release of the new CPI series on 12 February 2026, the RBI will present CPI inflation projection for the full year 2026-27 in the April 2026 policy statement. The Governor highlighted that on the growth front, economic activity remains resilient. The First Advance Estimates suggest continuing growth momentum, driven by domestic factors amidst a challenging external environment. The growth outlook remains favourable, he noted.
After a detailed assessment of the evolving macroeconomic conditions and the outlook, the MPC voted unanimously to keep the policy repo rate unchanged at 5.25 per cent; consequently, the standing deposit facility (SDF) rate under the liquidity adjustment facility (LAF) remains at 5 per cent and the marginal standing facility (MSF) rate and the Bank Rate at 5.50 per cent. The MPC also decided to continue with the neutral stance.
