Inflation seen closer to target in FY26: RBI report

The Reserve Bank of India® (RBI's) state of the econom report observed that an durable alignment of headline retail inflation with the target of 4 per cent could recommence in the second half of FY25 and sustain until numbers closer to the target are seen during the course of FY26, dashing hopes of any reduction in the policy repo rate in the current financial year.

-  MANOJIT SAHA

The report, authored by RBI staffers, including Deputy Governor in charge of monetary policy Michael Patra, said though headline numbers may fall in July and August due to base effect, it is likely to reverse in September.

"A modest easing of headline inflation in the reading or April 2024 conrmed our expectation hat an uneven pace of alignment with the target is underway," said the report, which does not represent the views of the central bank.

The RBI has projected consumer price index (CPI) inflation of 4.5 per cent in FY25, with Q1 at 4.9 per cent; Q2 at 3.8 per cent; Q3 at 4.6 per cent; and Q4 at 4.5 per cent.