Core inflation saw a slight uptick to 4.4 per cent, primarily driven by a surge in gold prices, RBI Governor Sanjay Malhotra said during the monetary policy committee (MPC) briefing. He also noted that headline CPI inflation is expected to edge over 4 per cent in the fourth quarter of FY26. The Reserve Bank revised its inflation projections downward for most quarters, with the full-year FY26 CPI forecast lowered to 3.1 per cent from the earlier estimate of 3.7 per cent. Inflation for Q2 and Q3 of FY26 is now projected at 2.1 per cent and 3.1 per cent, respectively, down from 3.4 per cent and 3.9 per cent. The estimate for Q4 remains unchanged at 4.4 per cent, while inflation in Q1 of FY27 is expected to rise to 4.9 per cent.
The RBI Governor said that the uncertainties of tariffs are still evolving. “The MPC noted that while headline inflation is much lower than projected earlier, it is mainly due to volatile food prices. Inflation is projected to go up from the last quarter of this financial year. Growth is robust, as our earlier projections. The uncertainties of tariffs are still evolving…The macroeconomic condition calls for continuing of repo rate at 5.5 per cent,” he noted.
Sanjay Malhotra said, “Over the medium term, the Indian economy holds bright prospects in the changing world order, drawing on its inherent strengths.”
“We will endeavour to maintain a sufficient liquidity in the banking system so that the productive requirements of the economy are met and transmission to money markets and the credit markets remains smooth. The internal working group was set up by RBI to review our liquidity management framework. The group has submitted its report, and we will shortly be publishing the same on the RBI website for public consultation,” he added.
What Does Lower Projection Mean
The RBI lowering its inflation projections means it now expects price rises to be slower than earlier anticipated. This indicates easing cost pressures in the economy, particularly from food and fuel, and gives the central bank more room to support growth through rate cuts if needed. It also suggests improved purchasing power for consumers and a more stable economic outlook.
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Previous MPC Meeting
The latest policy decision comes after the Monetary Policy Committee’s move in June to cut the repo rate by 50 basis points to 5.5 per cent, driven by a moderation in inflationary pressures. At the time, RBI Governor Sanjay Malhotra highlighted that both short-term and medium-term inflation had eased into the central bank’s comfort zone, allowing for more policy room. He also noted that a decline in food inflation had reinforced the RBI’s accommodative approach.
