RBI projects CPI inflation at 5.2% for FY27, sees Q3 inflation rising to 6% due to rising food and fuel costs

RBI Governor Sanjay Malhotra, while speaking at the Monetary Policy Committee (MPC) meeting, said, Considering all factors, CPI inflation for this year is projected to be 5.2 per cent, with Q2 at 4.9, Q3 at 6 and Q4 at 5.7 per cent, with the risks being evenly balanced. CPI inflation for the first quarter of the next year was projected at 5.6 per cent."

CPI inflation rose to 4.8 per cent in August from 4.5 per cent in July. This was largely driven by higher inflation in food and fuel components, the Governor said.

Food price increases have become more broad-based, along with spikes in certain items such as sugar and onion. Fuel inflation also inched up in August, mostly due to unfavourable base effects.

Core inflation rose to 4.2 per cent in August after remaining at 3.9 per cent for three consecutive months. Core inflation excluding precious metals stood at 2.9 per cent in August.

The broadening of price pressures was also visible in diffusion indices, with the weighted share of items recording inflation over 4 per cent increasing to about 37 per cent in August.

The near-term outlook on inflation points towards continued pressures from the supply side on account of a variety of reasons, the Governor said, pointing to the deficient southwest monsoon, El Nino and further citing increased volatility in international oil prices as crude remains above USD 101 per barrel at the time of filing this report.

The RBI said price pressures were increasingly becoming visible in food commodities apart from oil. It also noted early signs of inflation becoming generalised from heightened core inflation and higher inflation across a large segment of the CPI basket.

Core inflation for the year was projected at 4.4 per cent, while headline inflation for FY26-27 was projected at 5.8 per cent.

RBI has raised the repo rate by 25 basis points to 5.5 per cent, with the Governor citing rising geopolitical uncertainty, persistent inflation risks, the deficient southwest monsoon and the West Asia conflict among the factors influencing the decision. The central bank has also changed its stance from neutral to calibrated tightening.

RBI took into account rising global bond yields and a more hawkish stance among other central banks, saying the evolution of the inflation outlook will remain a key concern for monetary policy going forward. (ANI)