RBI MPC Policy: Central bank revises inflation estimate downwards to 2% for FY26

RBI MPC Policy: The Reserve Bank of India (RBI) revised inflation forecast downward to 2% for 2025–2026 from 2.6% that was earlier projected with Q3 at 0.6% and Q4 at 2,9%. Consumer Price Index (CPI) inflation for Q1 next year, 2026-27 is projected at 3.9%, and Q2 at 4%. The risks are evenly balanced, said Governor of the RBI, Sanjay Malhotra today.

Here are the quarterly estimates:

Q3FY26: Cut to 0.6% from 1.8%

Q4FY26: Cut to 2.9% from 4%

Q1FY27: Cut to 3.9% from 4.5%

Q2FY27: Forecast at 4%

The headline CPI inflation dropped to a record low in October 2025. According to the RBI Governor, the quicker-than-expected reduction in inflation was primarily driven by a decrease in food prices, which is unusual for the typical trend seen during September and October.

Sanjay Malhotra said that core inflation (CPI headline excluding food and fuel) remained mostly stable in September and October, despite ongoing price pressures from precious metals. Excluding gold, core inflation decreased to 2.6% in October. In general, the reduction in inflation has become more widespread.

Regarding the inflation outlook, food supply conditions have improved due to increased kharif production, robust rabi sowing, sufficient reservoir levels, and favorable soil moisture. With the exception of certain metals, international commodity prices are expected to decrease in the future. Overall, inflation is anticipated to be lower than previously estimated in October, primarily due to the drop in food prices, according to Malhotra.

RBI Monetary Policy 2025

The Reserve Bank of India’s Monetary Policy Committee (MPC) revealed a reduction of 25 basis points in its policy repo rate, bringing it down to 5.25% on Friday, December 5, after holding steady in its last two meetings in August and October. Previously, the MPC had lowered interest rates by a total of 100 basis points during February, April, and June.

The MPC also opted to maintain a neutral stance. Nonetheless, Prof. Ram Singh expressed the opinion that the stance should shift from neutral to accommodative. The upcoming MPC meeting is set for February 4 to 6, 2026.

The Reserve Bank of India has announced plans to carry out open market operations (OMO) purchases of government securities totaling ₹1 lakh crore, along with a 3-year dollar-rupee buy-sell swap.

The next meeting of the MPC is scheduled during February 4 to 6, 2026.

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