RBI marginally raises inflation projection on higher precious metals prices

Mumbai: The Reserve Bank on Friday revised upwards inflation projection for the current fiscal year to 2.1 per cent and for first and second quarters of the next financial year, mainly due increase in prices of precious metals. The central bank projected the consumer price index (CPI)-based inflation for first and second quarters of 2026-27 and 4 per cent and 4.2 per cent, respectively. In December, the projection for 2025-26 was 2 per cent. CPI inflation for Q1, 2026-27 and Q2 were estimated at 3.9 per cent and 4 per cent, respectively.

Headline CPI inflation remained low at 0.7 per cent in November and 1.3 per cent in December 2025. While food group continued to be in deflation, inflation within the fuel group remained moderate in November and December. Core inflation (CPI excluding food and fuel), too, remained benign, despite the pick-up in prices of precious metals. Excluding gold, core inflation remained stable at 2.6 per cent in December. The revised outlook for CPI inflation in Q1:2026-27 and Q2 at 4.0 per cent and 4.2 per cent, respectively, continues to be benign and near the inflation target, said RBI Governor Sanjay Malhotra while unveiling the bi-monthly monetary policy, the last for the current fiscal year. "The slight upward revision in the inflation outlook is primarily due to increase in prices of precious metals, which contribute about 60-70 basis points. The underlying inflation continues to be low," he said.

The governor said near-term outlook suggests that food supply prospects remain bright on the back of healthy kharif production, sufficient buffer stocks of foodgrains, favourable rabi sowing and adequate reservoir levels. Core inflation, barring potential volatility induced by prices of precious metals, is expected to be range-bound, Malhotra said. Geopolitical uncertainty, coupled with volatility in energy prices and adverse weather events, poses upside risks to inflation. In view of the impending release of the new CPI series (base 2024=100) on February 12, the RBI will present CPI inflation projection for the full year 2026-27 in its April 2026 policy statement.