RBI lowers inflation forecast for FY26 to 2.6%
What's the story
The Reserve Bank of India (RBI) has revised its inflation forecast for the fiscal year 2025-26, lowering it to 2.6% from an earlier estimate of 3.1%. The revised estimates are based on the Consumer Price Index (CPI) and show a balanced risk outlook, according to RBI Governor Sanjay Malhotra. The central bank has also kept its repo rate unchanged at 5.5% with a 'neutral' stance. Seasonal trends and base effects could push inflation higher in upcoming months.
Inflation projections
Projections for upcoming quarters
The RBI has also revised its CPI inflation estimates for upcoming quarters of FY26. The Q2FY26 estimate has been lowered to 1.8% from an earlier projection of 2.1%. Similarly, the Q3FY26 estimate has been revised down to 1.8% from a previous estimate of 3.1%. For Q4FY26, the RBI predicts a CPI inflation rate of 4%, slightly lower than its earlier forecast of 4.4%.
Influencing factors
Core inflation remains stable
Malhotra attributed the low inflation rate to a sharp fall in food prices and stable core inflation. He said, "The overall inflation outlook has turned notably more benign in recent months, with headline inflation being revised down from 3.7% in June to 3.1% in August, and further to 2.6% most recently." The RBI governor also noted that the southwest monsoon's performance has been favorable, which could stabilize food prices further.