RBI Monetary Policy 2025: Central bank revises inflation downwards to 3.1% for FY26

RBI Monetary Policy 2025: RBI monetary policy: The Reserve Bank of India (RBI) revised inflation forecast downward to 3.1% for 2025–2026 from 3.7% that was earlier projected with Q2 at 2.1%, Q3 at 3.1%, and Q4 at 4.4%. Consumer Price Index (CPI) inflation for Q1 next year, 2026-27 is projected at 4.9%. The risks are evenly balanced, said Governor of the RBI, Sanjay Malhotra today.

The RBI Governor noted that the headline CPI inflation dropped for the eighth month in a row, reaching a 77-month low of 2.1% (year-on-year) in June 2025.

This decrease was mainly due to a significant drop in food inflation, which resulted from improved agricultural conditions and various measures on the supply side. In June, food inflation posted its first negative figure since February 2019 at (-) 0.2%.

High-frequency price indicators suggest that the trend of lower food prices is likely to persist through July this year as well. Core inflation, which fluctuated within a tight band of 4.1-4.2% from February to May, rose to 4.4% in June, partly influenced by a continued rise in gold prices.

"CPI inflation, however, is likely to edge up above 4% by Q4:2025-26 and beyond, as unfavourable base effects, and demand side factors from policy actions come into play. Barring any major negative shock to input prices, core inflation is likely to remain moderately above 4% during the year. Weather-related shocks pose risks to inflation outlook.

Considering all these factors, CPI inflation for 2025-26 is now projected at 3.1% with Q2 at 2.1%; Q3 at 3.1%; and Q4 at 4.4%. CPI inflation for Q1:2026-27 is projected at 4.9%. The risks are evenly balanced," said Governor of the RBI, Sanjay Malhotra today.

RBI Governor Sanjay Malhotra said that the Monetary Policy Committee (MPC) has opted to keep the policy repo rate steady at 5.50%. As a result, the standing deposit facility (SDF) rate under the liquidity adjustment facility (LAF) remains at 5.25%, while the marginal standing facility (MSF) rate and the Bank Rate continue to be set at 5.75%.

As a result, the MPC reached a unanimous decision to keep the repo rate steady. The MPC also agreed to closely monitor the incoming data and the changing dynamics of domestic growth and inflation in order to determine the suitable course of monetary policy. Consequently, all members opted to maintain a neutral stance.

The upcoming MPC meeting is planned for September 29 to October 1, 2025.

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