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Informist, Friday, Jun. 6, 2025

 

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* FY26 CPI inflation seen at 3.7%
* Cuts FY26 CPI inflation forecast to 3.7% from 4.0?rlier
* Cuts Apr-Jun CPI inflation forecast to 2.9% from 3.6?rlier
* Cuts Jul-Sept CPI inflation forecast to 3.4% from 3.9?rlier
* Hikes Oct-Dec CPI inflation forecast to 3.9% from 3.8?rlier
* Retains Jan-Mar 2026 CPI inflation forecast at 4.4%
* Risks to inflation forecasts are evenly balanced
* Inflation softened significantly in last few mos
* Signs of broad-based disinflation
* Signs of broad-based moderation in inflation
* CPI likely to undershoot the 4% target at the margin
* Near-term, medium-term inflation outlook gives confidence
* Food inflation outlook remains soft
* Core inflation expected to remain benign
* Core CPI also seen moderate due to benign commodity prices
* Core CPI largely steady, contained despite gold price rise
* Inflation expectations, especially rural, coming down
* Price stability key for equitable growth
* Price stability not sufficient to ensure growth
* Supportive policy environment vital amid high uncertainty
* RBI Malhotra: Broader message is inflation is under control
* RBI Malhotra: Safe to assume we have won the war against inflation
* RBI MAlhotra: FY27 inflation seen at 4.5%

 

NEW DELHI – The Reserve Bank of India Friday slashed its headline inflation forecast for the quarter ending June by 70 basis points to 2.9%, while lowering the projection for 2025-26 (Apr-Mar) by 30 bps to 3.7%. While the central bank draws comfort from the inflation outlook that points towards benign prices across major constituents, Governor Sanjay Malhotra said that "we need to remain watchful of weather-related uncertainties and the still evolving tariff related concerns with their attendant impact on global commodity prices."

 

"The near-term and the medium-term outlook now gives us confidence of not only a durable alignment of headline inflation with a target of 4% but also the belief that during the year, it is now likely to undershoot the target at the margin," Malhotra said in his third monetary policy statement on Friday. The RBI wants to give out the message that it has won the war against inflation, which is broadly under control, he said at the post-monetary policy press conference.

 

"While food inflation outlook remains soft, core inflation is also expected to remain benign with easing of international commodity prices in line with the anticipated global growth slowdown," he said. The central bank governor, however, noted that the last mile of disinflation "is turning out to be a little more protracted". 

 

"As growth inflation trade-offs is becoming more challenging, monetary authorities are charting out a more cautious and carefully calibrated policy trajectory," Malhotra said. Due to the above reason, the RBI's Monetary Policy Committee unexpectedly lowered the policy repo rate by 50 bps to 5.50% on Friday, and also changed the policy stance to 'neutral' from 'accommodative'.

 

As per latest data, India's headline CPI inflation fell to a 69-month low of 3.16% in April because of a decline in food prices and the statistical effect of a high base. The last time inflation was lower than April's print was in July 2019. This was the sixth month in a row that CPI inflation had declined, and also the third consecutive month when it had stayed below RBI's medium-term target of 4%. CPI inflation was 3.34% in March and 4.83% in April 2024.

 

The quarterly break-up of the central bank's latest inflation forecasts is as follows: 2.9% for Apr-Jun, 3.4% for Jul-Sept, 3.9% for Oct-Dec, and 4.4% for Jan-Mar. It had previously forecast inflation in the second quarter of FY26 to average 3.9% and the third quarter at 3.8%. "The risks are evenly balanced," the central bank said. The governor, at the press coneference, also said that inflation is expected to average at 4.5% in FY27 and that coupled with current uncertainties leave "limited space" for monetary policy to support growth. 

 

While inflation was below the RBI's 4% target in April, it is to be noted that core inflation--which excludes food and fuel items, whose prices can be volatile--remained at 4.1% for the second consecutive month in April. The last time core inflation was higher than 4.1% was in October 2023, when it was 4.3%.

 

Governor Malhotra is, however, not too worried as core inflation remained largely steady and contained during March and April, despite increase in gold prices exerting upward pressure. Gold, which has a share of 2.3% within CPI excluding food and fuel, contributed 21.4% to the core inflation in April 2025.

 

Food inflation--which has troubled the central bank for far too long--is expected to be benign due to the record wheat production and higher production of key pulses in the rabi crop season ensuring adequate supply of key food items. Going forward, the likely above normal monsoon along with its early onset augurs well for kharif crop prospects, the governor said. "Reflecting this, inflation expectations are showing a moderating trend, more so for the rural households," he said.

 

It is safe to say that inflation is not a concern for the central bank presently, especially not when compared to growth but price stability remains crucial. "I would like to highlight that there is no tussle between price stability and growth in the medium and long term," Malhotra said, adding that price stability is not sufficient to ensure growth. "A supportive policy environment is vital. This is even more important during periods of high uncertainties such as the current times," he said. "At the Reserve Bank, therefore, while price stability remains the focus of monetary policy, we are not oblivious to putting in place complementary monetary and credit policies and regulations that support growth and prosperity," the governor said.   End

 

Reported by Priyasmita Dutta

Edited by Akul Nishant Akhoury

 

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