CPI Target Slashed: RBI Projects 2.6% Inflation for FY26; Check Details

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*RBI Cuts Inflation Forecast to 2.6%*

*Food Prices and GST Reforms Drive Moderation*

*Repo Rate Held Steady at 5.5%*

The Reserve Bank of India (RBI) on Wednesday revised its inflation target for the current financial year to
2.6 per cent, marking a significant moderation from earlier projections. In the August policy, the target had been revised down to
3.1 per cent, from 3.7 per cent projected in June.

Announcing the decision, RBI Governor Sanjay Malhotra said the Monetary Policy Committee (MPC) observed that the overall inflation outlook has turned even more benign over the last few months. He stated, “The average headline inflation for this year has been consequently revised lower from
3.7% projected in June,
3.1% in August,
to now 2.6%.”

According to the governor, the improvement has been largely driven by a sharp decline in
food prices and the rationalization of Goods and Services Tax (GST) rates. As a result, the RBI has also revised down the headline inflation outlook for the fourth quarter of this year and the first quarter of next year.

Highlighting the broader context, Malhotra said the Indian economy continues to exhibit strength, supported by a good monsoon. He added, “Buoyed by a good monsoon, the Indian economy continues to exhibit strength by registering a higher growth in Q1. At the same time, there has been a considerable moderation in headline inflation.”

On the global front, the governor noted that major economies such as the United States and China have shown more resilience than anticipated, registering robust growth. However, he cautioned that the global outlook remains uncertain due to elevated policy risks. Inflation also remains above targets in some advanced economies, posing fresh challenges for central banks worldwide.

The RBI’s latest revisions reflect an optimistic assessment of India’s economic growth and inflation trajectory.

In a unanimous decision, the MPC of the RBI also kept the policy repo rate unchanged at 5.5 per cent. The committee met on September 29 and 30, and October 1, to deliberate on the prevailing economic conditions and interest rate trajectory. After reviewing the macroeconomic outlook, the MPC voted unanimously to maintain the repo rate at 5.5 per cent.

*Inflation Forecast Comparison*

*Policy Rates at a Glance*