RBI Governor Forecasts CPI at 3.2% for Q4 FY26: A Blueprint for Macroeconomic Stability

Market snapshot: In the final bi-monthly monetary policy address of the 2025-26 fiscal year, RBI Governor Sanjay Malhotra projected a benign inflation trajectory, with Consumer Price Index (CPI) inflation expected to settle at 3.2% in Q4 FY26. This comes as the Monetary Policy Committee (MPC) unanimously decided to keep the repo rate unchanged at 5.25%, following a significant easing cycle in 2025 that saw cumulative cuts of 125 basis points.

Summary: The RBI has signaled confidence in India's price stability by projecting Q4 FY26 inflation at 3.2%, despite firmed-up growth expectations following the recent India-US trade agreement. The central bank maintained the repo rate at 5.25% with a neutral stance.

Key Takeaways

• CPI inflation for Q4 FY26 is projected at 3.2%, with the full FY26 average expected at 2.1%.
• The repo rate remains steady at 5.25% with a neutral policy stance maintained by the MPC.
• A structural shift in the CPI basket (effective Feb 12, 2026) will reduce food weightage to 36.75%, likely reducing headline volatility.

SAHI Perspective

The RBI's projection of 3.2% is strategically positioned within the 2-6% tolerance band but reflects a cautious uptick from the record lows of late 2025. By maintaining the repo rate at 5.25%, the RBI is balancing the 'Goldilocks' phase of high growth (7.4% GDP projection) and controlled inflation. Investors should view this as a commitment to long-term stability, providing a fertile ground for equity markets despite intensified global headwinds.

Closing Insight

The projected 3.2% inflation print underscores the success of the RBI's preceding rate-cut cycle and the cooling of food prices. As India transitions to a modernized statistical framework, the central bank appears well-equipped to sustain a steady growth-inflation balance.

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