RBI projects FY26 inflation at 4.2%, down from 4.8% estimate in 2024-25

RBI projects retail inflation at 4.2% for next fiscal year, citing good crop prospects and global uncertainties.

The Reserve Bank on Friday (February 7, 2025) projected the retail inflation at 4.2% for next financial year beginning April while retaining the forecast for 2024-25 at 4.8%.

Unveiling the last bi-monthly monetary policy of this fiscal year, RBI Governor Sanjay Malhotra said food inflation pressures, in absence of any supply side shock, should see a significant softening due to good kharif production, winter-easing in vegetable prices and favourable rabi crop prospects.

He further said core inflation is expected to rise but remain moderate.

Also, continued uncertainty in global financial markets coupled with volatility in energy prices and adverse weather events, presents upside risks to the inflation trajectory, he said.

Taking all these factors into consideration, CPI inflation for 2024-25 is projected at 4.8% with Q4 at 4.4%, Mr. Malhotra said, after chairing his first Monetary Policy Committee meeting.

"Assuming a normal monsoon next year, CPI inflation for 2025-26 is projected at 4.2% with Q1 at 4.5%; Q2 at 4%; Q3 at 3.8%; and Q4 at 4.2% ," he said, and added the risks are evenly balanced.

In its last monetary policy review, the RBI had projected the headline inflation for 2024-25 at 4.8% with Q3 at 5.7%; and Q4 at 4.5%. CPI inflation for Q1:2025-26 is projected at 4.6%; and Q2 at 4%.