ArdorComm Media News Network
August 5, 2025
The Reserve Bank of India (RBI) is likely to revise its inflation forecast downward for the fiscal year 2025–26 during its upcoming Monetary Policy Committee (MPC) meeting in August, according to a report released by CareEdge Ratings.
The report projects that Consumer Price Index (CPI) inflation may average around 3.1% in FY26 — notably below the RBI’s current estimate of 3.7%. However, inflation is anticipated to rebound to 4.5% in FY27, largely due to the low base effect from the previous year.
“Given the sharp drop in FY26 inflation, a natural statistical rebound could lift average inflation to 4.5% in FY27,” CareEdge noted.
The report attributes the recent softness in inflation to a significant drop in food prices and a supportive base effect. CPI inflation eased to 2.1% in June, the lowest level since January 2019, surprising market expectations. A major factor in this decline was deflation in the food and beverages category, which saw an overall contraction of 0.2% year-on-year. Specific items showed sharp price declines: vegetables fell 19%, pulses 12%, spices 3%, and meat 1.6%.
The outlook for food inflation remains benign, supported by a strong agricultural season and continued base effect benefits.
Core inflation, which excludes volatile food and fuel prices, ticked up slightly to 4.4% in June. However, this uptick was largely attributed to a spike in precious metal prices. When excluding gold and silver, core inflation stands at a more moderate 3.5%, the report clarified.
While global economic slowdown continues to weigh on demand, CareEdge cautioned that factors such as geopolitical tensions and shifts in trade policies could still create volatility in commodity prices, warranting continued vigilance.
Despite these risks, the inflation landscape appears favourable in the short term. However, the report warns that CPI inflation could breach the 4% threshold in the last quarter of FY26 as the positive base effect wanes.
With actual inflation likely to undershoot RBI’s current projections for FY26, the central bank may opt to officially lower its target in the upcoming policy announcement.
Source: ANI