The Reserve Bank of India’s Monetary Policy Committee (MPC) on Friday revised up its inflation forecast for the fiscal year 2025-26, cutting the consumer price index (CPI) projection to 2.1% from 2% previously.

The decision was announced at the end of the MPC meeting chaired by Sanjay Malhotra, along with the central bank’s latest monetary policy statement.

The Reserve Bank of India’s Monetary Policy Committee (MPC) has raised its inflation predictions for the first two quarters of fiscal 2027. They now expect inflation of 4% in the first quarter and 4.2% in the second. This indicates that they believe inflation will decline more slowly than previously thought.

This decision was taken during a three-day meeting. The committee kept the repo rate steady at 5.25 percent and maintained a neutral policy stance, indicating flexibility as it navigates global volatility and domestic growth conditions.

Headline CPI inflation remained low in November and December, according to Governor Malhotra.

CPI inflation projections revised

Based on the updated assessment, the MPC established the following inflation path:

• Q4 FY26: rose to 3.1% from 2.9%

The central bank said that excluding precious metals, underlying inflationary pressures remain muted and risks are evenly balanced at this stage.

The outlook for food supply remains favorable

The committee said the near-term food supply outlook is favorable, supported by healthy kharif production, adequate buffer stocks of foodgrains, encouragement of rabi sowing and comfortable reservoir levels.

Core inflation, excluding potential volatility in precious metals, is expected to remain contained, and underlying pressures continue to remain contained.

Marked risks, 4Q base effects to increase inflation

The RBI warned that geopolitical uncertainty, energy price volatility and adverse weather events pose upside risks to the inflation outlook. It also highlighted that unfavorable base effects, following a sharp fall in prices in the fourth quarter of 2024-25, are expected to push up year-on-year inflation in the fourth quarter of the current year, although the momentum remains subdued.