RBI Shifts Inflation Outlook to 2.1%: Maintaining Stability Amid Firming Prices

Market snapshot: The Reserve Bank of India (RBI) has marginally revised its CPI inflation projection for FY26 to 2.1%, up from the previous estimate of 2.0%. While the figure remains well within the central bank's tolerance band of 4% +/- 2%, the revision indicates a subtle shift in the MPC's assessment of price dynamics. Concurrently, the Monetary Policy Committee (MPC) led by Governor Sanjay Malhotra decided to maintain the policy repo rate at 5.25%, following a series of cumulative cuts totaling 125 basis points since early 2025.

Summary: RBI raises FY26 inflation forecast to 2.1% from 2.0% while keeping repo rates steady at 5.25%, citing resilient 7.4% GDP growth and firming domestic price trends.

Key Takeaways

• Inflation Revision: FY26 CPI projected at 2.1%, reflecting a 10bps increase from December 2025 estimates.
• Monetary Policy: Repo rate remains unchanged at 5.25% with a 'neutral' stance maintained by the MPC.
• Economic Resilience: India's FY26 GDP growth estimate remains robust at 7.4%, supported by strong domestic demand and recent trade pacts.

SAHI Perspective

The 10bps upward revision in inflation is likely a preemptive adjustment for normalizing base effects and stabilizing food prices after record lows in late 2025. By maintaining the repo rate at 5.25%, the RBI signalizes a pause in its aggressive easing cycle (125 bps cut in the last 12 months). This 'neutral' stance provides the central bank room to observe the impact of the newly announced Union Budget 2026 and the India-US trade deal on industrial input costs and export-led growth.

Closing Insight

India remains in a sweet spot of low inflation and high growth; the 2.1% projection confirms that the disinflationary peak has likely passed, and the focus is now on consolidating price stability at these lower levels.

High Performance Trading with SAHI.