RBI MPC Outcome: RBI Revises FY25 CPI Inflation Forecast Higher To 4.8%, Cites Food Inflation Pressure

The Reserve Bank of India (RBI) has raised its Consumer Price Inflation (CPI) forecast for the financial year 2025 to 4.8%, up from its earlier estimate of 4.5%. The adjustment comes on the back of soaring retail inflation, which hit a 14-month high of 6.21% in October, breaching the central bank's comfort band of 4% to 6%.

The increase in October's inflation was primarily driven by a surge in vegetable prices, which skyrocketed 42% year-on-year and 11% from the preceding month. This spike added pressure to household budgets and economic projections.

In his post-policy address, RBI Governor Shaktikanta Das acknowledged the strain caused by food price inflation but expressed optimism about a seasonal correction. "Near-term inflation remains elevated due to food price pressures. However, vegetable prices are expected to see a seasonal decline during the winter months," Das said.

Quarterly Inflation Adjustments

The RBI has revised its quarterly inflation projections to reflect current trends. The forecast for the third quarter of FY25 has been significantly increased to 5.7%, up from the previous estimate of 4.8%. Similarly, the inflation projection for the fourth quarter has been adjusted upward to 4.5%, compared to the earlier figure of 4.2%.

Looking ahead, the central bank expects inflation to moderate, projecting a rate of 4.6% for the first quarter of FY26, revised from 4.3%. For the second quarter of FY26, inflation is expected to stabilize at 4%.

The upward revision reflects the challenges posed by fluctuating food prices and their impact on overall inflation. While the RBI remains optimistic about a seasonal easing of food inflation, the sustained pressure on prices highlights the need for careful policy management.