The Reserve Bank of India (RBI) Governor, Sanjay Malhotra, noted during the RBI Monetary Policy Committee meeting announcements on Wednesday that food inflation has turned positive, while inflation expectations have sharply declined, moving forward. For the financial year 2025-26, the Consumer Price Index (CPI) inflation is projected at 4 per cent, with quarterly estimates of 3.6 per cent for Q1, 3.9 per cent for Q2, 3.8 per cent for Q3, and 4.4 per cent for Q4. Governor Malhotra also stated that the risks surrounding these projections are considered to be evenly balanced.
In its previous meeting, the MPC had maintained its inflation forecast at 4.2 per cent for FY26.
Notably, India’s retail inflation had eased to a seven-month low of 3.61 per cent in February, with food inflation dropping below 4 per cent for the first time in nearly two years. Food inflation had further cooled to 3.75 per cent, marking its lowest level in 21 months, as vegetable prices fell by 1.1 per cent year-on-year. Despite this decline in food inflation, RBI Governor Malhotra stressed that the MPC remains cautious, given global uncertainties, particularly those stemming from US President Donald Trump’s tariffs.
Repo Rate Update
Additionally, the central bank has shifted its stance from ‘Neutral’ to ‘Accommodative.’ The RBI has lowered its repo rate by 25 basis points to 6 per cent, following a similar 25-bps rate cut in February—the first rate reduction since May 2020. At that time, the RBI had slashed the repo rate to 4 per cent to support the economy amid the COVID-19 pandemic. Since then, the central bank has raised the repo rate seven times, bringing it to 6.5 per cent.
