RBI lowers inflation projection to 2% for FY2026, says Governor Sanjay Malhotra

Reserve Bank of India (RBI) governor Sanjay Malhotra said on Friday that the central bank has lowered the inflation projection to 2 per cent for FY2026 from the previous 2.6 per cent. He added that inflation is expected to be below the 4 per cent mark in the first half of next year. 

He said that CPI inflation stands at 0.6 per cent in Q3FY26, at 2.9 per cent in Q4FY26, adding that it is expected to reach 3.9 per cent in Q1FY27 and 4 per cent in Q2FY27. 

The central bank slashed inflation for Q3FY26 from 1.8 per cent to 0.6 per cent, for Q4FY26 from 4 per cent to 2.9 per cent, and from 4.5 per cent to 3.9 per cent for Q1FY27. 

Furthermore, he said that headline inflation has moderated and is expected to be softer than projected. Core inflation remained largely contained in September-October this year, adding that it eased at the margin in Q2 this year and is expected to remain anchored ahead, the RBI boss mentioned. 

"Core inflation, which had been rising steadily since Q1 last year, eased at the margin in Q2 this year and is expected to remain anchored in the period ahead. So, both headline and core inflation are expected to be at or below the 4% mark during the first half of next year. The underlying inflation pressures are even lower, as the impact of increased prices of precious metals on this inflation number is about 50 basis points."

Moreover, he said that the first half of the year was a "rare Goldilocks period".

Sanjay Malhotra said, "We look back at the year so far with satisfaction. The economy witnessed robust growth and benign inflation. Since the October policy, the Indian economy has witnessed rapid disinflation, with inflation dipping to a mere 0.3% in October 2025. Real GDP growth accelerated to 8.2% in Q2, aided by strong festive spending and rationalisation of GST rates. Inflation at a benign 2.2% and growth at 8% for the first half of the year presents a rare Goldilocks period.”

Moreover, the markets took positively to the central bank's last MPC for the year 2025. Sensex rose over 400 points after the RBI slashed the repo rate by 25 basis points to 5.25 per cent. Sensex rose 407 points from 85,078 to 85,496 in early deals, Nifty soared 117 points to 26,102 from 25,985.