In Mumbai, the Reserve Bank of India’s monetary policy committee lowered its projection for the country’s headline inflation in the 2025‑26 financial year to 2 %. The cut from the earlier 2.6 % estimate—announced back in October—was driven largely by the recent sharp fall in food prices and the effects of GST rate reductions.
Governor Sanjay Malhotra highlighted that the MPC had observed a notable easing in headline inflation, attributing it mainly to the surprisingly low food price index. He added that the committee’s updated forecasts for average inflation this year and for the first quarter of the next are now even lower.
“the MPC noted that headline inflation has eased significantly and is likely to be softer than the earlier projections, primarily on account of the exceptionally benign food prices. Reflecting these favourable conditions, the projections for average headline inflation in 2025-26 and Q1 2026-27 have been further revised downwards.”
Malhotra also mentioned that, aside from food and fuel, core inflation remained stable in late September and early October despite ongoing upward pressure from precious metals. If gold is excluded from the core measure, the index edged down to 2.6 % in October, indicating a broader slowdown across many sectors.
The governor pointed out that higher kharif output, robust rabi planting, sufficient storage water, and adequate soil moisture have all strengthened the agricultural supply outlook. He noted that, with the exception of a few metals, international commodity prices are expected to cool over the coming months.
“Overall, inflation is likely to be softer than what was projected in October, mainly on account of the fall in food prices. Considering all these factors, CPI inflation for 2025-26 is now projected at 2.0 per cent with Q3 at 0.6 per cent; and Q4 at 2.9 per cent. CPI inflation for Q1 2026-27 and Q2 are projected at 3.9 per cent and 4.0 per cent, respectively. The underlying inflation pressures are even lower as the impact of increase in price of precious metals is about 50 bps. The risks are evenly balanced,” Malhotra highlighted.
He explained that core inflation, which had been on an upward trend since the beginning of 2024‑25, narrowed slightly in Q2 2025‑26 and is expected to stay anchored thereafter. Both headline and core figures should stay at or below the 4 % target throughout the first half of 2026‑27, with the influence of precious‑metal price hikes contributing only about 50 basis points. Economic growth, although remaining robust, is forecast to taper slightly.
“Thus, the growth‑inflation balance, especially the benign inflation outlook on both headline and core, continues to provide the policy space to support the growth momentum. Accordingly, the MPC unanimously voted to reduce the policy repo rate by 25 bps to 5.25 per cent,” Malhotra observed.
Finally, the governor noted that headline CPI reached an all‑time low in October 2025. The rate fell faster than analysts expected, driven by a correction in food prices—a reversal of the usual pattern seen during the September‑October period.
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