RBI to Revise Inflation Target for FY26: Forecast Predicts 4.5% Surge in FY27

The Reserve Bank of India (RBI) begins its three-day Monetary Policy Committee meeting on Monday, August 4, 2025. The decision of the meeting, led by RBI Governor Sanjay Malhotra, is going to be announced on Wednesday, August 6, 2025.

RBI To Revise Inflation Target

The RBI is expected to revise its inflation target downward for the fiscal year 2025-26 in the upcoming August MPC meeting, as per a recent report by CareEdge Ratings.

The Consumer Price Index (CPI) inflation may average around 3.1% in FY26, which is significantly below RBI's current projection of 3.7%. For FY27, inflation is expected to remain higher at around 4.5%, due to the low base effect from FY26.

According to the report, MPC is expected to lower "inflation target... CPI inflation to average around 3.1% in FY26. Given the low base of FY26, we expect average CPI inflation to be higher, around 4.5% in FY27."

The report further added that headline CPI inflation eased sharply to 2.1% in June, coming in below expectations and marking the lowest level since January 2019. The decline in inflation was primarily driven by continued moderation in food prices and a favourable base effect from the previous year.

Food Inflation

Additionally, within the CPI basket, the food and beverages category entered into deflation, contracting by 0.2% year-on-year in June. This was also led by steep declines in vegetable prices (-19%), pulses (-12%), spices (-3%) and meat (-1.6%).

According to the report, food inflation is expected to remain contained, on the back of healthy agricultural output and continued base effect support.

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