Mumbai, December 5 (IANS). The Monetary Policy Committee (MPC) of the RBI on Friday reduced the country’s inflation rate estimate for the current financial year to 2 percent from the earlier 2.6 percent in view of the GST rate cut and a sharp fall in food prices.
The RBI Governor said, “Headline inflation has declined significantly and is expected to be softer than previously estimated, mainly due to benign food prices. In view of these favorable circumstances, average inflation projections for Q1 2025-26 and Q1 2026-27 have been revised downwards.”
Despite persistent pressure on precious metal prices, core inflation (excluding food and fuel prices) remained largely under control in September-October, he said. Excluding gold, core inflation stood at 2.6 percent in October.
The RBI Governor said food supply prospects have improved due to high Kharif production, good Rabi sowing, adequate reservoir levels and favorable soil moisture. Barring some metals, international commodity prices are likely to soften going forward.
The RBI Governor said, “Overall, inflation is likely to be lower than the previous estimate for October due to decline in food prices. Taking into account all these factors, CPI inflation for 2025-26 is now estimated at 2.0 per cent, 0.6 per cent in Q3 and 2.9 per cent in Q4. Similarly, CPI inflation for Q1 and Q2FY27 is projected at 3.9 per cent and 2.9 per cent respectively for Q1FY27. It is estimated to be 4.0 percent.
He noted that core inflation had been rising steadily since Q1 2024-25 and declined marginally in Q2 2025-26 and is expected to remain stable going forward. Both headline and core inflation are expected to remain at or below the 4 per cent target during the first half of 2026-27.
According to the RBI Governor, the benign outlook on the growth-inflation balance, particularly headline and core inflation, provides policy space to support growth momentum. Therefore, the MPC unanimously decided to reduce the policy repo rate by 25 basis points to 5.25 percent.
–IANS
SKT/
