RBI raises CPI inflation projection to 5.1% for FY27, core inflation pegged at 4.7%; key details

The Reserve Bank of India (RBI) Governor Sanjay Malhotra, in his address on Friday, June 5, 2026, said that CPI (consumer price index) inflation for 2026-27 is projected to stand at 5.1%, higher than the earlier estimate of 4.6%.

He further stated that CPI inflation for the first quarter of FY27 was projected at 4.2%, for the second quarter at 5.1%, for Q3 at 5.9%, and for Q4 at 5.4%.

Furthermore, core inflation (CPI excluding food and fuel) has been projected to stand at 4.7% in FY27.

Excluding precious metals, Governor Malhotra said, core inflation is projected to be lower, suggesting that demand pressures will remain contained.

These forecasts, he added, are subject to upside risks due to global supply chain disruptions and uncertainty about the spatial and temporal distribution of the monsoon. However, an adequate stock of foodgrains and satisfactory reservoir levels will provide some comfort.

While headline CPI firmed marginally from 3.2% in February 2026, it remained below the target in both March and April 2,026 at 3.4% and 3.5%, respectively.

Fuel inflation remained modest as retail fuel prices largely remained unchanged in March and April despite the sharp spike in international energy prices.

“This indicates that the input cost pressures, as reflected in a sharp increase in April's wholesale price index (WPI), have not yet fully manifested in CPI,” Guv Malhotra noted.

Core inflation held steady at 3.7% from January to April 2026. Additionally, core inflation, excluding precious metals, was much lower at 2.1-2.2%.

However, since May, retail fuel prices have increased cumulatively by 7.4% for petrol and 8.4% for diesel, he stated, adding that the increase implies a direct impact of about 36 basis points (bps) on headline inflation, which, along with second-order effects, would get reflected in CPI inflation in the coming months.

Governor Malhotra said that the passing-through of higher global energy prices has also been visible in several other inputs, such as commercial LPG, industrial raw materials, chemicals, rubber, and plastic products.

“The second-round impact of higher input costs could exert upside pressure on CPI inflation going forward,” he said.

The monetary policy committee (MPC) of the Reserve Bank of India (RBI) voted unanimously to keep the repo rate unchanged at 5.25%, largely in line with market expectations.

RBI Governor Sanjay Malhotra, in his address on Friday, June 5, 2026, said that the decision to maintain the status quo on the key policy rate was unanimous among the members.