RBI Cuts India’s Inflation Forecast to 2% for 2025–26

Mumbai- The Reserve Bank of India’s Monetary Policy Committee (MPC) on Friday sharply reduced its inflation forecast for the financial year 2025–26 to **2%**, down from **2.6%** projected in October. The revision comes amid a steep fall in food prices and the impact of recent GST rate cuts.

RBI Governor **Sanjay Malhotra** said the committee observed that headline inflation has eased considerably and is now expected to stay below earlier estimates, mainly due to exceptionally favourable food price trends.

“Reflecting these conditions, the projections for average headline inflation in 2025–26 and Q1 2026–27 have been revised downwards,” Malhotra said.

### **Core Inflation Eases**

Malhotra noted that **core inflation**—which excludes food and fuel—remained contained during September–October despite elevated prices of precious metals. Without gold, core inflation fell to **2.6% in October**, indicating a broader decline in price pressures.

He added that the improvement in inflation is now more widespread across sectors.

### **Improved Food Supply Outlook**

The governor highlighted several positive developments that have boosted food supply prospects, including:

* Higher **kharif** output
* Strong **rabi** sowing
* Healthy reservoir levels
* Adequate soil moisture

He also said that barring a few metals, global commodity prices are expected to soften in the coming months.

### **Revised CPI Projections**

Based on these factors, the RBI now projects:

* **CPI inflation for 2025–26:** **2.0%**

  * **Q3:** 0.6%
  * **Q4:** 2.9%
* **CPI for Q1 2026–27:** 3.9%
* **CPI for Q2 2026–27:** 4.0%

Malhotra said underlying inflation is even lower, as precious metal price increases contribute about 50 basis points to the headline number.

### **Growth-Investment Balance Supports Rate Cut**

Even though growth remains resilient, the RBI expects a slight softening ahead. However, the mild inflation outlook provides space for policy support.

“With benign inflation on both headline and core, the MPC unanimously voted to reduce the policy repo rate by **25 basis points to 5.25%**,” Malhotra said.

He added that headline CPI inflation hit an **all-time low in October 2025**, with the drop largely driven by an unexpected correction in food prices—opposite to the usual September–October trend.

With inputs from IANS