RBI Raises FY27 Inflation Forecast to 5.1% on Persistent Price Pressures

RBI MPC Meeting 2026: Reserve Bank of India Revises Inflation Forecast Upward

The Reserve Bank of India (RBI) has revised its inflation forecast upward to 5.1% for FY27 from 4.6% previously projected, with quarterly estimates of 4.2% for Q1, 5.1% for Q2, 5.9% for Q3, and 5.4% for Q4. This revision comes as RBI Governor Sanjay Malhotra cautioned that the outlook remains subject to several upside risks, including heightened global uncertainty, potential supply-chain disruptions, commodity price shocks, and the possibility of El Niño conditions.

The RBI's inflation forecast for the current financial year (2026-27) has been revised upward, with core inflation projected at 4.7%. The quarterly estimates for FY27 have been revised as follows:

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RBI Governor Sanjay Malhotra noted that despite the revised inflation forecast, the central bank derives comfort from adequate foodgrain stocks and satisfactory reservoir levels, which are expected to help cushion any adverse impact on food prices and support overall inflation management.

The RBI's Monetary Policy Committee (MPC) unanimously voted to keep the policy repo rate under the Liquidity Adjustment Facility (LAF) unchanged at 5.25%. The Standing Deposit Facility (SDF) rate remains at 5.00%, while the Marginal Standing Facility (MSF) rate and the Bank Rate continue at 5.50%. The MPC also decided to maintain its 'neutral' policy stance, allowing it flexibility to respond to evolving domestic and global economic conditions.

Notably, headline retail inflation remained below the central bank's target in March and April 2026, despite rising from 3.2% in February. Consumer Price Index (CPI) inflation stood at 3.4% in March and 3.5% in April. Food inflation rose modestly during the period, while fuel inflation remained subdued, as retail prices of petrol and diesel remained unchanged in both months. Core inflation remained stable at 3.7% during March-April, while core inflation excluding precious metals was significantly lower at around 2.1-2..2%.

The RBI has also highlighted the impact of international crude oil prices, which averaged around $110 per barrel during April-May 2026. Current indications suggest that average oil prices for FY27 could be substantially higher than the assumptions made in the previous monetary policy review. Rising energy costs and higher input prices have also led to a sharp increase in wholesale price inflation (WPI) in April, underscoring emerging inflationary pressures in the economy.

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The next meeting of the Monetary Policy Committee is scheduled for 3 August to 5 August 2026.