NEW DELHI: The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) has projected inflation at 4.2% for the fiscal year 2025-26. This forecast comes as part of the central bank’s efforts to maintain price stability while supporting economic growth. Governor Sanjay Malhotra, leading his first MPC meeting, highlighted that inflation has declined, supported by a favorable outlook on food prices.

The MPC expects inflation to moderate further in FY26, gradually aligning with the RBI’s target. For the four quarters of FY26, the RBI MPC has projected inflation to be at 4.5% in the first quarter; 4% in the second quarter; 3.8% in the third quarter; and 4.2% in the fourth quarter, with risks evenly balanced.

The central bank also revised its inflation forecast for FY25 to 4.8%, reflecting a downward trend from the peak of 6.2% in October 2024. The decline in inflation is attributed to falling vegetable prices and a favorable monsoon season.

Governor Malhotra emphasized the importance of continued vigilance to navigate the macroeconomic environment effectively. He noted that while food inflation pressures are expected to ease, core inflation could see an uptick due to volatility in energy prices and potential weather disruptions.

The MPC’s decision to maintain a neutral stance and reduce the repo rate by 25 basis points to 6.25% is aimed at providing a balanced approach to supporting growth while keeping inflation in check. The central bank’s flexible inflation targeting framework has been instrumental in managing inflation and supporting economic stability.

Industry experts and economists have welcomed the RBI’s inflation projection, viewing it as a positive step towards economic recovery. However, they also caution that global uncertainties and domestic challenges could pose risks to the inflation trajectory.

Overall, the RBI’s projection of 4.2% inflation for FY26 is seen as a sign of optimism for the Indian economy, with expectations of continued moderation in inflation and support for economic growth issues. Among the key drivers on the demand side, household consumption is expected to remain robust, aided by the tax relief in the Union Budget 2025-26.