RBI raises inflation forecast for FY27 to 5.1%

RBI raises inflation forecast for FY27 to 5.1%

The Reserve Bank of India (RBI) has revised its inflation forecast for the fiscal year 2026-27, projecting consumer price inflation (CPI) at 5.1%.

This is a significant increase from the earlier estimate of 4.6% made in April.

The change comes as a response to rising food prices and retail inflation amid ongoing global uncertainties, including the West Asia crisis.

Quarterly inflation projections for FY27

The RBI's Monetary Policy Committee (MPC) has outlined quarterly inflation projections for FY27.

It expects inflation to be 4.2% in Q1, 5.1% in Q2, 5.9% in Q3, and 5.4% in Q4 of FY27 with risks evenly balanced across these periods.

The central bank has also revised its core inflation forecast for the fiscal year to 4.7%, up from an earlier estimate of 4.4%.

Inflation forecast vulnerable to several uncertainties: Malhotra

RBI Governor Sanjay Malhotra has warned that the inflation forecast is vulnerable to several uncertainties.

These include supply chain disruptions, global commodity price shocks, uncertainty about the spatial and temporal distribution of the southwest monsoon, and risks from possible El Nino conditions.

He said these forecasts are subject to upside risks due to heightened uncertainty caused by various factors.

Retail inflation eased to 3.48% in April

The central bank has decided to keep the repo rate unchanged at 5.25% amid emerging risks from higher crude oil prices, supply-chain disruptions, and weather uncertainties.

These factors further complicate the inflation outlook for the second half of this year.

Retail inflation eased to 3.48% in April, comfortably below RBI's 4% target while food inflation rose during this period.